What is the Best Way to Invest in Gold?
Are you looking for the best ways to invest in gold? Overall, there are a variety of options for investors. You can expand your portfolio today without ever holding a gold bar in your hands.
Gold is a staple for many investors due to a wide range of reasons. It’s a great safety net for inflation. Furthermore, it can become a useful hedging strategy in a volatile market.
This precious metal has been valuable for all of recent history. It can hold its value or rise in price no matter the economic climate. In today’s market, gold provides a great opportunity to increase your profits.
The Best Way to Invest in Gold Right Now
Before you consider investing in gold, it’s important to understand the market. The jewelry industry alone is nearly half of the demand. The physical ownership of gold accounts for another portion of the market. This includes bullion coins, medals and bars.
You can also discover the best way to invest in gold in the stock market. For example, this includes:
- Exchange-traded funds (ETFs)
- Mutual funds
- Gold mining company stocks
- Closed-end funds
- Futures contracts.
Each of these options has its own set of benefits. However, some may come with disadvantages as well. Let’s take a closer look below.
Gold ETFs and Mutual Funds
Gold ETFs are an option to invest in physical gold indirectly. SPDR Gold Shares (NYSE: GLD) is the largest physically backed gold ETF in the world. At one point, it was the largest ETF altogether.
Mutual funds, on the other hand, rarely invest in physical gold. They usually invest in mining companies. A few high-profile gold mutual funds include the Fidelity Select Gold Portfolio (MUTF: FSAGX) and the Sprott Gold Equity Fund (MUTF: SGDIX).
Is a mutual fund or an ETF the best way to invest in gold? This is actually more of a preference, but there is a distinct difference. A gold ETF’s value will fluctuate with the value of gold, while the mutual fund’s value will fluctuate with the value of the company.
Gold Mining Company Stocks
Outside of mutual funds, you can invest directly in mining companies with gold stocks. However, this comes with all the same risks as any other stock purchase.
The value of the gold itself doesn’t play as much of a role. The true indicator in gold mining stocks is the company’s production, overall inventory and leadership. If the company’s management falls apart, so will the stock price.
In general, this isn’t considered the best way to invest in gold. But, it is an option that has upside in certain circumstances. Popular gold mining stocks to watch include Barrick Gold Corp. (NYSE: GOLD), Kinross Gold Corp. (NYSE: KGC) and Yamana Gold (NYSE: AUY).
Closed-End Funds and Futures Contracts
Closed-end funds are a specific type of mutual fund that allows investors to invest in gold at a discount. Also, depending on the price of gold, you can invest at a premium.
If the price of gold spikes, then you can reap the benefits. Unfortunately, closed-end funds typically come with higher fees than many ETFs.
Lastly, you can enter into an agreement, through an exchange, to purchase gold at a certain date in the future. This is a futures contract for the sale of 100 troy ounces of fine gold.
If the price of gold goes up, the future seller will take a loss. However, if the price of gold goes down, the seller will receive a financial credit to cover the drop in market value.
Gold Jewelry and Coins
It’s up for debate whether jewelry is the best way to invest in gold. Yet, it’s certainly a popular way.
The key to this type of investment is in the amount of gold the item contains in karats. Gold jewelry can be as high as 24 karats. 24 karats is pure gold, while anything less is mixed with another metal. For example, 10 karats means the item is 10 parts gold and 14 parts of an additional metal.
Coins are another option for gold investors. Despite a down year in 2019, it’s actually more popular than you may think.
According to U.S. Mint, a total of 152,000 ounces of gold American Eagle coins were sold in 2019. This is a decrease of 38% from the previous year.
Discover the Best Way to Invest in Gold for You
Are you interested in commodity investing? If so, sign up for the Investment U e-letter below. Our experts provide up-to-date tips and trends in the stock market. You can learn more about the growth and projections of commodities at this current time.
There’s a reason many people use the phrase “the gold standard.” This is because gold is synonymous with success and riches. Find the best way to invest in gold with an eye on the future.