How to Invest in Gold

Gold bullion is likely the image that comes to mind when you think of investing in physical gold— neatly stacked bars in a pyramid gleaming from behind a vaulted door. These bars are most commonly available as one- and 10-ounce bars, which today translates to around $1,800 to $18,000. 

Before you decide to purchase gold from a reputable dealer, be on the lookout for current prices in the market so you can pick the best time to buy. Most dealers update their prices based on current spot prices.

Ranging from a quarter-ounce on the lower end to two ounces on the higher end, gold coins can often be purchased. The appraised value of each coin does not necessarily align with the value of gold, depending on the rarity of the coin. 

At the time of writing, a one-ounce American Gold goes for a premium hovering around $2,000. That gives you a nearly 5% return on investment compared to gold bullion. Because the value of the gold coin depends on its legitimacy, you’ll want to purchase it from a verified, licensed dealer.

Time to raid your grandmother’s closet or empty the jumbled contents of your jewelry box — investing in gold jewelry is both an investment in yourself and your financial future. 

Authenticity is key, so make sure your dealer has the credentials to back up their prices. Obtain as much documentation as possible stating your jewelry's purity in karats. The higher the karat value, the higher the purity. The higher the purity, the higher the value of your gold jewelry. 

Be aware, though, that retail markups based on which company designed and manufactured the jewelry could cost anywhere from 20% to more than three times the precious metal’s raw value.

Investing in gold requires investing in the stock of companies that mine, refine and trade gold. This strategy involves buying the stocks of gold mining companies using a brokerage account. Some of the most popular stocks in this sector include:

• Newmont Corp. (NEM). 
• Barrick Gold Corp. (GOLD). 
• Franco-Nevada Corp. (FNV). 

Unlike investing in physical gold where you know exactly what you’re getting for what you pay, the shares gold mining companies come with risks that correlate with gold prices and the fundamentals related to each company’s current profitability and expenses. Hedge your portfolio from volatility by diversifying your assets.

ETFs and mutual funds also provide an alternative to investing in physical gold. They can provide long-term stability, and offer more liquidity compared to physical gold and more diversification to hedge to individual stock volatility. These pooled investment securities can be passively or actively managed using index funds that track the price of gold in the market.

Keep in mind that mutual funds and ETFs are a promise backed by the market based on equity or debt. This means the value of gold mutual funds and ETFs may not entirely match up with the market price of gold, and these investments may not perform the same as physical gold.

This form of speculative investing involves a high amount of risk that requires active monitoring of these derivatives. The value futures and options agreements depend on the price of gold as an underlying asset. Futures require that you buy or sell a security for a set price on a certain date, regardless of the current market conditions. Options give you the option to buy or sell a security if it reaches a certain price on or before a certain date. You’ll need to establish an online brokerage account to get started. Be vigilant about commission fees.