Ways to invest in Gold
Gold has always been a rich choice for the people from prehistoric times to the modern era. Investors buy this precious metal to create a wall between the political unrest and inflation. Additionally, there are many options available to own gold in different forms. There are many opportunities floated by the local jewelers, stocks market analysts and the commodity experts for owning gold.
We’ve illustrated and explained the various modes in which gold investment could be made.
1) Gold Bullion
This is the best way to own a direct form of gold. Gold bullion is any form of gold (pure or nearly pure) having certification for its weight and purity. It can include bars, coins or any gold ornament of any size. The serial number is attached to gold bars also.
Heavy gold bars might look impressive but they are not easy to buy or sell. If you own a large gold bar and wish to sell a part of it, it becomes difficult to do the same. On the other hand, the bullions held in small-sized bars have higher liquidity level and is common for sale/purchase in the market.
2) Gold Coins
There are large quantities of gold coins floated by governments all over the world. These coins are mainly bought by the investors from private dealers. The gold bullion coins are convenient for sale/purchase and hence, have a good liquidity level. It is a good way to invest and there are reputed dealers found with minimum research and have been located in big cities. It is important for the investor to choose the right sources to purchase the widely circulated coins to make the appropriate choice.
The gold bullion in large number might require better storage and insurance costs. It is a direct investment and each dollar change in the value will consequently change the value of one’s investment.
3) Gold Mining Companies
There are many companies specializing in the mining and refining and they have a profitable response from the gold market. The investment in such companies can be a good way to gain from gold and it even has a lower risk level than the other modes of investment.
The largest gold mining companies have attained success in different ways and these companies show a profit at the times of stagnant or even declining gold prices. It is advisable to give some part of your investment to the gold mining company stocks. Also, it is safer than gold bullion in a way that there is no security issue as prevalent in the physical form of gold. The selection of right companies is quite essential in building a strong position in the company.
4) Gold ETFs and Mutual Funds
This is a safe way to purchase the gold bullion. Exchange-traded funds (ETFs) include the shares of the specialized instruments representing a fixed gold amount. It is sold and purchased similar to the stocks in any IRA or brokerage account. Owning ETFs or mutual funds is easier and comparatively cheaper than owning gold bars or coins. It is a good option for the small investors as they can even purchase gold in small installments.
Many mutual funds own gold company stocks or gold bullions in their portfolios. The investors need to know that the mutual funds will contain a part of the commodity and it won’t give a chance to the owners to completely follow gold stocks. Some funds make an investment in indexes of mining companies and have actively managed stocks. Traditional mutual funds are managed actively and the ETFs have a passive index-strategy with low expense ratio. The average gold investors take ETFs and mutual funds as the safest way of making an investment in gold.
5) Gold Jewelry
The maximum part of the gold production in the world is used to make jewelry. The global population and wealth growth makes a huge demand for gold used in jewelry. This purchase is somewhat price-sensitive and might result in minor losses. The purchase of jewelry at the retail prices marks, auction purchases and buying it at an appropriate pricing is a good option. Gold jewelry is beautiful and liked by people all over the world. It is an average investment form for the customers and a good business for the jewelers.
6) Gold F&O
Futures are contracts for buying and selling a given item on a particular date in the upcoming period. Futures are traded through contracts and are different from shares. This is a good option for the experienced investors. People usually adopt this scheme because there are low commission costs and margin requirements.
Future options are the best alternatives to buy the contract within a time frame at the present time. The advantage to this is that it limits losses and leverages the original investment. The future contract on margin requires more capital amount than the originally invested terms. The only disadvantage with F&O is that the investor needs to pay a premium for the underlying gold value to own the option. It is a volatile approach but the cheapest way to buy or sell gold for large investments.
Conclusion
The investors can choose any of the above options to make an investment in the glittering commodity, gold. It is comfortable to hold gold on a piece of paper and on the other hand, it might appeal to the eyes and mind to see it in physical form. For the aggressive investors, F&O is a good opportunity to invest in gold. Beware that the investments are derivatives of the price of the fold and there could be sharp moves anticipated for the metal. Futures are the best way to invest in gold.
By far, the futures are the most efficient way to make the gold investment. The contracts need to be looked on properly and rolled over the periodic levels at the mode of expiry. ETFs and mutual funds are the best for small investors having a little budget (one-time or every month) for the purchase of gold and the related stocks.