Gold is considered a safe investment option as its price often increases as stock markets experience a decline, but many investors hesitate to buy it. Gold cannot be easily liquefied, but it is a good store of value that acts as a hedge against both inflation and deflation. It also diversifies one’s investment portfolio and retains its value despite geopolitical uncertainties. Here are five ways one can add this precious metal to their portfolio.
Physical gold bullion
Gold in a bar is considered bullion when it is at least 99.5% pure. In many cases, purchasing bullion is the most economical option and is traded across the world. Although physical gold can take on many different forms, gold bars remain a real, physical asset, and they eliminate the risk of being defaulted on a trade. In contrast, stocks, bonds, and other financial instruments run the occasional risk of trade failure or default. Physical gold bullion also helps one diversify their portfolio. Putting all financial eggs in one basket, as is often the case with paper or digital assets, is never a good idea.
Gold coins and bars
Governments today offer pure gold coins and bars exclusively for financial investment. Like United States Mint and its American Eagle coin series, many other nations produce their own gold coins. Some popular contemporary gold coins are the South African Gold Krugerrand, British Gold Britannia, Canadian Gold Maple Leaf, and Austrian Gold Philharmonic, among others. The two main reasons for their popularity are their unique designs and their flexibility that allows people to invest in small amounts, which can be as little as 1 gram or one ounce. On the other hand, each coin comes with some cultural symbols and significance unique to that country, making it a collectible with emotional as well as financial value.
Gold futures contracts
Futures contracts allow investors to speculate on the future price of gold and profit from the changes. They are traded on the commodities exchange (COMEX), which is run by the Chicago Mercantile Exchange (CME). A futures contract, unlike an options contract, calls for both parties to carry out the transaction, even if it is not profitable. One needs to have a brokerage account to invest in gold futures. Trading is permitted in three contract sizes: 100, 50, and 32.15 troy ounces. The major advantages of a futures contract are that it offers good liquidity, with trading available nearly 24 hours a day during the trading week, and one can profit exponentially from gold’s fluctuating price trends.
Gold jewelry
A preferable investment option for casual investors is buying gold jewelry. It comes with several advantages, including beautiful jewelry one can wear, its ability to be covered by most homeowner insurance policies, and a potential source of appreciation in the future.
Mining stocks
Mining stocks are stocks of companies that extract precious metals like gold from the ground and refine them for commercial purposes. Investing in mining stocks can be volatile, but it offers good long-term returns on investment. The value of mining stocks will grow with the increase in production or the price of gold. Some large-scale mining companies even pay dividends on these investments.
Gold exchange-traded funds (ETFs)
ETF is a relatively recent innovation and a passive investment instrument that aims to track the domestic price of gold. It gives investors exposure to gold without having to directly purchase, store, and resell it. Currently, only authorized purchasers and certain banks are permitted to buy and redeem their ETF shares for actual gold. Some well-known gold ETFs include iShares Gold Trust, SPDR Gold Shares, GraniteShares Gold Trust, ProShares Ultra Gold, etc.
Where can one buy gold?
One should look for reliable, trustworthy precious metals dealers by doing some simple R&D. Dealers registered with legit websites like Better Business Bureau (BBB) are a good place to start. BBB allows people full access to the companies’ profiles, honest ratings, and previous client experience, including complaints and the companies’ responses.
However, a seller offering low gold prices that seem unrealistically good, i.e., gold priced below the spot price, would be a cautionary sign. Legitimate dealers cannot make a profit if they sell gold below the spot price, so this could be an indication of illegally-sourced or counterfeit gold. One should also compare prices from multiple sellers, both local and online. If one opts to buy gold coins online—often a quicker and easier option—they should check out the seller’s inventory on their website.
Buying from banks: Although some banks do provide gold coins and bars for sale, a great majority of national banks do not. Due to the volatility of their prices, banks typically steer clear of selling precious metals. Even if a bank offers gold, its inventory size often cannot match that of precious metals companies and other dealers.
