How to Invest in Gold (7 Options in 2023)
Growing up, gold was always portrayed as this magical metal that had the power to make anyone rich.
Whether it was in movies, T.V. shows, or even in real life, it seemed like everyone wanted a piece of it.
In today’s world, while it may not be able to make you an overnight millionaire, gold is still a precious commodity, especially if you have a long-term plan.
In this article, I’ll explore whether gold is a good investment option.
From investing in a gold IRA to getting the latest gold jewelry to go along with your outfit (and increase your net worth), I’ll also cover all the different ways you can invest in gold.
Let’s get started.
Deciding If Gold Is A Good Investment Option
Gold is often seen as a go-to option for those who want to diversify their investment portfolio.
This is because gold doesn’t move in the same direction as stocks and other investments.
When these assets perform negatively, gold usually does well.
This has led to gold being seen as a safe investment option, especially during times of economic downturn.
In fact, in August 2020, gold prices reached an all-time high.
On the flip side, when comparing gold to other assets like stocks or real estate, which can generate income through dividends or rent quite quickly, some believe gold doesn’t have that same potential.
That said, most people don’t realize that gold can be very liquid as an asset.
Due to high demand, you can quickly liquidate your gold investments for cash when needed.
Why Professional Investors Like Gold
The following are a few key reasons why professional investors like to invest in gold:
- Returns: based on history, gold has traditionally been a good investment, especially during periods of economic uncertainty.
- Value Stores: Gold can be stored in solid bullion form because of its physical nature. This means that, unlike other assets, it can be seen. This is an attractive proposition for many investors.
- Liquidity: despite being a tangible asset, gold can be very liquid due to demand. This means that it can be quickly sold for cash when needed.
- Safeguards: Knowing that as other assets are declining in value, the price of gold is maintaining its purchasing power can be very reassuring for many investors. This is an essential factor to consider with fluctuations happening with other assets.
The Best Ways To Invest In Gold
Let’s now go over some of the best ways to invest in gold.
Gold jewelry is one of the most popular ways to invest in gold.
This is because it’s a very tangible asset and easy to liquidate for cash as needed.
Since owning gold jewelry doesn’t require special skills or knowledge, it’s a good option for those new to investing.
It’s also non-reactive so that it won’t tarnish over time.
Plus, gold is a very distinct color that many people find appealing when showing their status.
As far as precious metals go, gold is also relatively affordable.
This makes it a good option for those who want to invest but don’t have much money.
One downside of investing in gold jewelry is that it’s one of the most accessible forms of gold to get stolen or lost.
Whether you’re keeping it at home or wearing it out in public, there’s always the risk that it could be taken from you or even accidentally misplaced.
Gold Mining Companies & Stocks
Gold mining stocks refer to the stocks of companies involved in the gold mining industry.
This can include everything from exploration and development to production and sales.
Investing in gold mining stocks is an excellent way to get the right exposure to the gold market without physically owning any gold.
Of course, one downside of gold mining stocks is that they’re subject to the same volatility as any other stock.
As with any other asset in the stock market, diversification is critical.
This means that you shouldn’t put all of your eggs in one basket and should always try to diversify your portfolio as much as possible.
Gold bullion coins are another popular way to invest in gold.
Various coins are available, and they’re easy to buy and sell.
From Canadian maple coins to maple leaf coins, there are tons of gold collectibles that investors can choose from.
This is another good option for beginners and advanced investors alike.
One advantage of gold coins is that they’re small and easy to store.
This is an attractive proposition for many investors, especially those that live in small apartments or houses.
Another advantage of gold coins is that they’re easy to transport.
This is helpful if you need to move your investment around for any reason.
However, one downside of gold coins is that they can be challenging to value.
Since there are so many different types and designs, it can be hard to determine how much each one is worth.
This can make it difficult to sell gold coins at the right value when needed.
Gold Futures Contracts
As far as investment decisions go, gold futures contracts are one of the most complex options.
This is because they require a great deal of knowledge and understanding to be successful.
In the simplest terms, a gold futures contract is an agreement to buy or sell gold at a specific price on a certain date.
The market value of gold can fluctuate greatly, so it’s essential to be aware of this before entering into a contract.
This way, you can make an informed decision about whether or not this is a suitable investment.
There are also ETFs & mutual funds, which are similar to stocks but focus on gold.
However, they differ because professionals usually manage them and often have a lower expense ratio.
These can be a good option for those who want to invest in gold but don’t have the time or knowledge to do so themselves.
Streaming & Royalty Companies
This investment strategy can be highly profitable in the short-term and long term.
However, like the other methods above, it’s essential to understand the risks involved before you commit any money.
Streaming and royalty companies provide financing to gold miners in exchange for the right to stream their gold production.
In other words, these companies agree to pay upfront for the gold that the gold miner will produce.
In return, they receive a percentage of the gold produced, which can be sold later for a profit.
Of course, since these companies are providing financing to miners, there is always the risk that the mine could fail and the company would lose its investment, in which case, so would you.
Physical gold bullion bars are typically one of the first things that come to mind when people invest in gold.
Gold bars are kept in various places, including banks, vaults, and storage facilities.
They come in various sizes, from gold ingots that weigh a few ounces to bars that weigh hundreds of pounds.
Of course, the larger the bar, the more expensive it will be.
Gold bullion bars are also relatively easy to buy and sell and are a good option for those who want a physical asset they can hold onto.
A gold IRA is a retirement account that allows you to invest in gold.
Like other IRAs, there are tax benefits associated with a gold IRA.
However, there are also some risks involved.
For example, if the price of gold falls, you could lose money.
Still, a gold IRA rollover can be a good option for those that want to diversify their retirement portfolio.
Just be careful of any gold IRA scams out there – shady companies will try to take advantage of new investors.
Gold Investment Tips
Here are a few essential tips to consider when investing in gold.
1. Decide Why You Want To Invest In Gold.
As an investment strategy, gold is often used as a hedge against inflation or economic uncertainty.
For example, gold prices tend to increase when the stock market is volatile or in political turmoil.
Some investors use gold to diversify their portfolios and reduce their overall risk.
Knowing why you want to invest in gold will help you determine how much and what type of gold investment to choose.
To this end, you might want to speak to a financial advisor for investment advice if you’re unclear about why owning physical gold is right.
2. Consider How You Will Invest In Gold.
When it comes to doing your own gold investing, there are several different ways to go about it.
You can buy physical gold, invest in gold stocks and gold exchange-traded funds, or have mutual funds focusing on these precious metal investments.
With various gold content options available, it’s essential to understand the difference between each before making a decision.
For example, physical gold is a more direct investment in precious metal, but it comes with storage costs and other risks.
Gold stocks and ETFs give you exposure to gold without owning the physical asset, but they also come with their own set of risks.
3. Determine The Amount Of Risk You Are Willing To Take.
The amount of gold you invest in will affect the risk level of your overall portfolio.
For example, if you only invest a small percentage of your portfolio in gold, the impact of gold prices on your portfolio will be minimal.
However, if you invest a significant portion of your portfolio in gold, the price movements will substantially affect your overall returns.
Understanding how much risk you are willing to take before investing in gold is essential.
4. Consider Your Investment Time Horizon.
For beginners learning about investing, the concept of time horizon is critical.
When it comes to gold, there are two different approaches investors take.
Some investors buy gold and hold it for the long term, while others buy and sell gold more frequently to profit from short-term price movements.
The market value over these various periods is influenced by multiple factors, such as economic growth, inflation, and central bank policy.
Gold prices can be volatile in the short term, so if you’re planning on holding gold for a relatively short time, it’s essential to stay updated on the latest market news and trends.
Over time, things tend to balance themselves out and have historically led to an increase in the price of gold.
5. Understand The Fees Associated With Investing In Gold.
When it comes to personal finance, fees are often one element that isn’t considered until it’s too late.
A brokerage account with high fees can affect your investment returns over time.
For example, if you’re investing in gold ETFs, you’ll want to factor in the fund’s expense ratio before making a decision.
6. Diversify Your Portfolio With Other Investments.
While no one wants to consider their gold value dropping, it’s important to remember that no investment is guaranteed.
To protect yourself, it’s essential to diversify your portfolio with other investments.
You might elect to invest in physical gold, gold stocks and ETFs, or even gold funds according to your risk tolerance and preference.
Financial advisors typically argue that no more than 10% of your portfolio should be allocated to any asset, including gold.
While past performance indicates that gold is a relatively stable investment, there’s always the potential for prices to drop in the future.
By diversifying your portfolio, you can minimize your overall risk and protect yourself from losses if gold prices do fall.
How to Invest in Gold – FAQ
What Are Exchange-Traded Funds?
ETFs are funds that are traded on a stock exchange.
They offer investors exposure to a basket of assets, or a specific sector or region, without having to buy each security.
What Does Volatility Mean?
Volatility is a measure of how much the price of an asset fluctuates over time.
As the value of gold can be very volatile, it’s essential to understand what this means before investing.
Are Derivatives A Good Investment?
Derivatives are financial contracts that are done between two or more parties.
They can be used for hedging purposes or to speculate on the future price of an asset.
However, they can be complex and risky, so it’s essential to understand them before investing.
What Is The World Gold Council?
The World Gold Council is an organization that promotes the use of gold and provides research and data on the gold market.
What Does A Gold Mining Company Do?
Gold miners extract gold from the earth using various methods, such as open-pit mining or underground mining.
They then sell the gold to buyers, such as jewelers or investors.
How Does Gold Compare To The U.S. Dollar?
The United States Dollar is the world’s reserve currency and is used by many countries as their official currency.
Gold is often seen as a safe haven asset, and its price is usually inversely correlated with the U.S. dollar.
This means that when the dollar weakens, gold becomes more expensive, and vice versa.
What Defines Pure Gold?
24k gold is the definition of pure gold.
This type of gold has no impurities and is very rare.
However, because it is so rare, it is usually very costly.
Investing in gold is a popular choice for many.
With gold prices having recently rallied, this is an attractive option for investors.
However, the bottom line is that whether you buy physical gold on the gold market, invest in a gold ETF, or purchase shares of a gold mining company, you need to do your homework and understand the risks involved.
What do you think about investing in gold?
Which gold investment option makes the most sense for you?
Let me know in the comments below.
Further reading on AdamEnfroy.com: If the dollar collapses, gold can be one of the best ways to protect your money.
In addition, investment opportunities are everywhere around you.
From investment apps that take care of most of the work for you, to peer-to-peer lending sites that allow you to invest in various opportunities, there are plenty of options to consider.
Moreover, if you’re at a stage where you would like to invest money but need to figure out how to have money to invest in the first place, here are the most realistic ways to make money online at home today.