Gold has been a valuable form of transaction for thousands of years. Even today, it is a great investment choice for both beginner and advanced investors. Apart from being a major form of investment, gold has applications in jewelry, electronics, and more. Hence, you can use gold as an asset or an alternative form of investment.
Being a precious metal, gold is considered a safe haven asset by many. Therefore, if you are considering investing in gold, you must be aware of certain factors before you start investing. Some of the major gold investment options are bullion, mutual funds, jewelry, futures, and mining companies.
So, if you want to start investing in gold, read on.
A General Overview of Gold as a Form of Investment
There are many ways a beginner can start investing in gold. Some of the major ways to consider if you want to invest in gold are bullion (gold bars through gold dealers), mutual funds, mining companies, futures, and gold jewelry.
Along these, you will get direct investment opportunities only from bullion, futures, and some specialty funds. Apart from that, other forms of gold investments derive their value from other gold sources.
However, now investors buy gold to keep it as a hedge for inflation and political unrest. This is because gold has a low-value correlation if you compare it to other classes of assets.
A good way to start investing in gold is through xauusd. Basically, XAUUSD shows the price of gold in USD. In fact, it is a popular currency pair that is traded on the foreign exchange market.
In addition to that, it is also important to diversify your investment portfolio with commodities like gold. This will help you to lower your overall portfolio risk.
Starting Your Investment
One of the most popular ways to buy gold is to purchase gold bars or coins. However, you will need storage space to store them and these are not very liquid forms of investments. Apart from that, you can also invest in mutual funds and exchange-traded funds (ETFs). Generally, these funds track the prices of gold.
For instance, you can buy gold ETFs and mutual funds in small dollar amounts as compared to bullion. Also, there is no direct price exposure to worry about in this case.
On the other hand, you can also access derivatives markets with your brokerage account. This way, it will be easier to buy gold futures and options.
However, if you want indirect ownership of gold, you can invest in gold mining stocks. Here, you must be aware of the fact that the share prices of these companies do not track the value of gold properly in the long run.
How to Start Investing in Gold? – Best Options to Consider
Investing in gold is easy if you want to consider the following options:
1. Gold Bullion
If you want to own gold directly, gold bullion is the best option. However, you need to pay a huge sum upfront since the price of gold is currently quite high.
In fact, a good thing about gold bullion is that it is a nearly pure form of gold. Also, its weight and purity are certified, and they consist of serial numbers for security. Generally, gold bullion comes in the form of coins and bars.
However, the large size of these gold bars makes them very illiquid. Hence, even the buying and selling process is costly. On the other hand, if you hold gold bullion in small-sized bars, you will get more liquidity. Apart from that, there are storage and insurance costs of gold bullion.
2. Gold Coins
Many sovereign governments around the world issue large quantities of gold coins. Commonly, investors buy these coins from private dealers while paying a premium of 1-5% above the value of the gold.
One of the major advantages of buying gold bullion coins is that you will find their prices in various global financial publications. Moreover, gold coins are minted in smaller sizes as well. Hence, many beginner investors find them convenient. Also, with just a minimal search, you can find reputed dealers.
3. ETFs and Mutual Funds
A gold exchange-traded fund is a share with specialized security. Basically, it represents gold in a fixed amount (one-tenth of an ounce of gold). If you want to buy and sell gold ETFs, you can do them easily in any brokerage account or an IRA. Hence, this process is a cost-effective and easier type of investment.
On the other hand, there are many mutual funds that have gold bullion and gold companies in their portfolios. However, in this case, you need to be aware of the fact that most mutual funds do not focus solely on gold. They also buy different types of commodities. Hence, if you want low cost and diversification,
4. Gold Futures and Options
You can buy or sell a particular amount of gold at a particular date in the future if you own gold futures. Here, low commissions and low-margin requirements attract investors. However, before you invest in them, carefully read the contract specifications.
Options are alternatives to buying gold futures. Here, as the owner of options on gold futures, you can buy outright a futures contract.
5. Gold Mining Companies Stocks
Gold mining and refining companies also profit when gold prices increase. So, if you want to profit from gold and want to carry lower risks than other forms of investments, this is an effective option.
6. Gold Jewelry
Almost half of the gold produced is used in jewelry. Also, the demand for gold is increasing with time as the world population and overall wealth are increasing annually. Although it is not the most profitable way of investing, it is still an enjoyable option if you are into jewelry.
Start Investing Now
The best form of gold investment depends on your investment goals and existing resources. So, if you have good upfront capital, you might invest in gold bullion. However, if you want a cost-effective option, go with ETFs and mutual funds.
Do you have more suggestions regarding gold investment choices? Please share your ideas and opinions in the comments section below.
