Investors can invest in gold through exchange-traded funds (ETFs), buy shares in gold miners and partner companies, and buy a physical product. These investors have as many reasons to invest in metal as there are methods to make those investments. There are a multitude of ways to invest in gold. You can buy physical gold in the form of jewelry, bars, and coins; buy shares in a gold mining company or other gold-related investment; or buy something that gets its value from gold.
Each method has its advantages and disadvantages. That can make it overwhelming for novice investors to know how best to gain exposure to this precious metal. One of the benefits of investing in physical gold is that, if you need to cash it out quickly, you can. However, gold coins and bullion are often sold at a premium and bought at a discount, so you may not get the market price when you need to sell.
It's important to anticipate storing your gold in a safe place, whether literally a safe or a safe deposit box in a bank. VanEck Vectors Gold Miners ETF (GDX), on the other hand, is a passively managed fund that tracks an underlying basket of shares in gold mining and refining companies. Individuals who choose to invest in gold through options or futures contracts need to actively monitor their holdings in order to sell, renew, or exercise their options before they expire worthless. While the price of gold can be volatile, gold prices tend not to move along with stock and bond prices.
This helps investors seeking gold security and protection against inflation to benefit from a more liquid investment in gold than a physical investment in gold. If you decide that investing in physical gold is the right thing for you, here are a few things to keep in mind. Adding gold to your portfolio can help you diversify your assets, which can help you better weather a recession, but gold doesn't produce cash flow like other assets and should be added to your investment mix in a limited amount and with caution. If you look at historical gold prices, you'll see that the price of gold skyrocketed dramatically in the 2000s.
They also tend to match the performance of gold prices (or exceed it, in the case of streaming and royalty companies). Buying jewelry at retail prices means a substantial increase of up to 400% over the underlying value of gold. Diversification gives investors broad exposure to the gold mining segment, helping to reduce risk. If you are buying gold for your retirement account, you must use a broker to buy and a custodian to hold your gold.
Collector coins, such as South African Krugerrands, Canadian maple leaves and American golden eagles, are the most widely available types of gold coins.