Today’s topic seeks to educate the readers on Gold investment. We hope that this short article helps you decide what kind of Gold investment is suited for you. Investors have three options when it comes to Gold investment. These options include physical Gold, purchase shares of a mutual or exchange-traded fund, or trade futures and options in the commodities market. The options chosen by an investor depends on the level of knowledge and commitment available. The majority of investors looking for a simple approach would invest in Gold coins compared to the advanced investor that diversifies into Gold futures and options.
Buying Gold Bullion
Gold is an accessible form of investment asset as compared to other commodities. Individuals that seek to invest in Gold can make purchases through precious metals dealers, banks or brokers. Bullion bars are available in sizes ranging from a quarter-ounce wafer to a 400-ounce brick. Still, coins are typically the choice for new investors. These are new issues priced on their gold content, plus a premium, not to be confused with vintage numismatic coins.
Investing in Gold jewellery is another option of investment. Investors can enjoy wearing jewellery while watching their investment grow. Gold is often combined with other precious gems and metals to enhance the overall value and appearance of the jewellery. The value-added features of jewellery can typically be unwanted by investors seeking to invest in Gold solely. The simple reason is that there are added costs such as workmanship and retail markup.
Buying Gold Funds
Although it’s more feasible than, say, a barrel of oil or a crate of soybeans, owning physical Gold has its hassles: transaction fees, the cost of storage, and insurance. Investors interested in a more liquid and low-cost entry into the gold market might instead consider mutual funds and exchange-traded funds that replicate the movements of the commodity.
Generally, gold stocks rise and fall faster than the price of Gold itself. Individual companies are also subject to problems unrelated to bullion prices—such as political factors or environmental concerns. So investing in an ETF that owns gold stocks is a higher-risk way to play. Still, it does offer appreciation potential—which investing in bullion does not.
Buying Gold Futures
More experienced investors who don’t want to risk much capital might consider options on gold futures or options on a gold ETF. These contracts represent the right—but not the obligation—to buy or sell an asset (Gold in this case) at a specific price for a certain amount of time. Options are a great way to invest if you believe the price of Gold is going up or going down. Suppose the price does not meet your expectations. In that case, the maximum risk associated with buying options is the premium you paid to enter the contract.
Available in the U.S. through the Chicago Mercantile Exchange, put and call options on gold futures can be bought and sold through a futures broker. Options on SPDR Gold Shares ETF are also available to investors. Investors can trade in a standard brokerage account that has received approval for options trading.2 Meanwhile, some traders buy and sell gold futures contracts—which trade on CME under the symbol GC—to speculate on short-term moves higher or lower in the yellow metal.
Buying Gold Mining Stocks
If you can’t get your hands directly on any gold, you can always look to gold mining stocks. However, keep in mind that gold stocks do not necessarily move in concert with bullion prices. The performance of Gold stocks depends on the performance of the mining companies and how they deploy their capital and generate profits. You do not have the security of physical possession of the metal if the companies you buy are unsuccessful.
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