You’ve been considering your investment options and have decided gold is the way to go. You know it has a solid history of increasing in value more consistently than the dollar. And you like that its value isn’t tied to any unstable currencies or unpredictable stock markets. You’ve done your research and you’re confident it’s a smart investment.
Now, you just need to figure out how you want to make your gold investment. There are a number of ways to invest in gold, each with their proponents. Here’s a rundown of your main options.
1. Gold Bars
Gold bars are an efficient and practical option for anyone who wants a gold investment they can hold in their hands. They come in a variety of sizes with the most commonly available options being gram gold bars, troy oz gold bars and kilo gold bars. You can buy gold bars that come sealed in an assay card that tells you their weight and purity so you know they’re not counterfeit.
The benefits of investing in gold bars:
Gold bars offer one of the best values for the amount of gold you’re getting. As an investment you can hold in your hand and store on your own, you’ll always know exactly how much you have.
To keep in mind:
You should usually expect some extra expenses on top of the cost of the bars themselves in the form of transaction fees and shipping costs. And you’ll need to figure out where to keep your gold where you know it will be safe, which can mean additional expenses.
2. Certified Gold Coins
Like gold bars, certified gold coins are an investment you can hold in your hand. They differ in a couple of key ways though. For one, they’ve been certified by an independent third party that confirms their authenticity. Also, while a gold bar’s value is related to its mass and purity, certified coins can often be worth more than a comparably sized gold bar due to factors like rarity and popularity with collectors.
The benefits of investing in certified gold coins:
The certification process provides extra confidence in the authenticity of certified gold coins. The value of certified coins isn’t tied directly to the gold market like gold bullion is, meaning that the value of your certified gold coins could stay consistent or even go up when the gold market falls. And their rarity makes them valuable to collectors, which can up the value of your investment over time.
To keep in mind:
Like gold bars, you’ll have to consider how best to store your certified coins safely. Certified gold coins will also usually cost more for the amount of gold you’re getting than gold bullion does. And you’ll encounter the same types of fees and shipping costs you can expect from buying gold bars.
3. Gold Bullion Coins
Your third option for buying physical gold is gold bullion coins. They fall somewhere between our first two categories. They share a similar size and shape to certified coins, but don’t have that extra certification level. As such, their value is directly related to their mass and purity and tied to the gold market just like gold bars.
The benefits of investing in gold bullion coins:
The benefits of gold bullion coins are roughly the same as those of gold bars, but may be easier to store and transport because they do not usually come in an assay card. Their design also makes them more easily recognizable to some buyers, so investors may have an easier time selling them when the time comes.
To keep in mind:
Gold bullion coins aren’t certified, so you don’t have the same level of guaranteed authenticity as with certified coins. This increases the importance of buying gold from a reputable dealer, who should guarantee the authenticity of everything they sell. As with the other types of physical gold, they’ll need to be stored somewhere safely and you can expect some extra fees and expenses to apply when buying them.
4. Gold ETF
Gold exchange-traded funds (ETFs) provide investors with a way to invest in gold without purchasing a physical commodity. Buying and selling with these works similarly to buying stocks in the stock market, but instead of buying a share in a company, you’re buying a share of the gold that the ETF owns, which is usually stored securely in a bank.
The idea behind gold ETFs is that every share is backed by physical gold. That means anytime a lot of people buy, it’s up to the fund to purchase more physical gold to back those investments. And most ETFs have a third-party company do inventory every so often to check that the amount of physical gold matches the number of stocks.
The benefits of investing in gold ETFs:
The biggest benefit of gold ETFs is for people who don’t want to deal with the storage of physical assets. You don’t have to worry about finding a safe spot for your investment or worrying about potential theft, but the value is still tied to the gold spot price so your investment is safe from the volatility of the stock market.
To keep in mind:
There are fees you’ll have to pay every time you buy and sell shares in an ETF, as well as ongoing management fees charged by the fund, which reduces what you’re able to earn on your overall investment. And even though you don’t have direct access to the gold, ETF shares are taxed at the same rate as bullion.
But one of the biggest downsides to investing in ETFs is that it’s hard to be 100% sure that your investment really is backed by the physical product. And even if the gold is there, you don’t ever really own the gold outright in the way you do when you have physical access to it.
5. Mining Company Stocks
Another option for investing in gold without buying the physical commodity is investing in the companies that mine the gold. This gets you even further from the physical asset itself than ETFs do. With mining company stocks, you’re investing in the stock market and thus taking on the risks that entails.
The benefits of investing in gold mining stocks:
As with gold ETFs, you don’t have to worry about storage or theft.
To keep in mind:
You’re not investing in gold itself here, you’re investing in the mining company. As with any company, a mining company can have a bad quarter for any number of reasons, including those that are unrelated to the spot price of gold. If weather problems set the miners back or the company spends too much to make a healthy profit for the quarter, then your stock won’t be worth as much. And if you’re considering gold because you’re worried about the volatility of the stock market, gold mining stocks are no less risky than many other types of stocks.
For most people interested in investing in gold, the best way to own the precious metal is to go straight for the metal itself. With physical gold – as long as you buy it from a reliable source – you know exactly what you have. Besides that, you can always pull out your gold and appreciate its beauty when you want. Having it in hand means you don’t have to jump through any special hoops to access your actual investment; it’s always there when you need it.