Many people think there are only a few ways to invest in gold but the truth is that many unique opportunities exist. Of course, to see the greatest return on investment, it would be imperative for the right method to be used on an investor-by-investor basis. After all, people invest in gold for different reasons and with different levels of experience so the method used should coordinate. We chose what experts deem to be the five best ways to invest in gold although others exist.
Bear in mind that gold will always be the best dollar hedge investment. The most direct methods to counter the dollar includes owning physical metal, gold mining stocks, and mutual funds so as value of the United States declines, value of gold would rise. The one thing for investors to remember is that gold’s future is bright and in fact, experts speculate that while prices are currently high, the real potential for profit is yet to come.
While world economies might be off the gold standard, gold’s tangible value will continue to be the foundation for real value, something confirmed by looking at historical data. Of the five ways to invest in gold mentioned below, the right one would again be based on goal for return on investment but also market experience and knowledge of these options.
Owning Physical Gold
Most people that purchase physical gold choose bullion although gold coins and even gold jewelry would also be good choices. Throughout history, ownership of physical gold has represented wealth and power and today, most people still view gold ownership in the same way although financial stability and security are also important.
The fact is that of all currencies, gold is the only real money, something with value that cannot be controlled or changed by governments. Of course, value will increase and decreased based on supply and demand. Although there are some incredible benefits associated with gold ownership, there are also a few disadvantages with the main one being that gold the spread for trading between bid and asking price is wide.
For this reason, someone interested in owning gold as an investment needs to understand that profits would be experienced long-term, not short-term. Because of this, investors should consider gold ownership as a defensive asset. Specific to physical gold, the best options include minted coins to include the American Eagle, South African Krugerrands, and Canadian Maple Leafs, all in one-ounce weights.
Exchange Traded Funds or ETFs
For someone a little more serious about gold investments, this would be an excellent consideration. This type of mutual fund works by trading on a stock exchange similar to conventional stock but in this case, the ETFs portfolio would be fixed ahead of time and it would not change. This is why the only two ETFs trading in America use gold bullion as the only asset. The two symbols under which these ETFs are found include iShares COMEX Gold Trust or IAU and streetTRACKS Gold Trust or GLD.
Mutual Funds
Another one of the popular ways to invest in gold is with mutual funds. Typically, investors interested in exposure to precious metals but those with concerns about physical gold ownership would view this as a good type of investment. In this case, portfolios would hold mutual funds of gold stocks. In other words, stocks would be associated with gold mining companies. There are a number of top-rated companies although experts agree that Newmont is one of the best.
Junior Stocks
We also wanted to mention junior gold stocks as one of the best ways to invest in gold although it is somewhat more speculative than others. These stocks usually do not own productive mines and in some cases, exploration is a part of the process to achieve potential for higher profits but this also means greater risk for loss.
Additionally, the level of capitalization would be less with junior gold stocks than with senior stocks bur for investors willing to take risk in exchange for the potential of significant gain, junior stocks would be an excellent investment.
Options and Futures
The final option we wanted to mention when it comes to ways to invest in gold is with options and futures. Because of the sophistication and complexity involved, experienced investors are typically attracted to this type of gold investment. With this, price movements could be speculated in both directions but if a “call” were purchased, there would be hope of prices going up since the purchase price would be fixed so the higher the price climbs the bigger the fixed option price and current market price margin.
On the other hand, if a “put” were purchased, price of gold would likely decline. One important note is that significant risk is associated with purchasing options and futures and in fact, approximately 75% of all purchased options end up expiring without any gain whatsoever. As stated, gold options and futures are complex so this way to invest in gold is only recommended for investors with experience but also in-depth knowledge specific to this kind of investment option.