Different Methods Of Gold Investment

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Feb 21 2022
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Are you curious about gold investments? Many investors are, as this commodity is considered safe with an extensive track record of gains.

When inflation spikes and the stock market seems unstable, individuals turn to gold. This asset has numerous attributes that make it even more attractive than stocks and bonds. It’s an inflation hedge and a fascinating storage of value.

Investors can choose from different methods of investment, such as bullion, futures, and options, mining stocks, etc.

Learn about each of these methods in detail.



A popular gold investment method is the investment in bullion. Individuals find it emotionally satisfying to possess this commodity in the form of coins, bars, and jewelry. While you will be able to admire your assets, such ownership comes with its drawbacks as well, such as the need to insure and safeguard your bullion. The only way for investors to make a profit is by relying on the increase in the price of this commodity.


Moreover, gold bars range from a few grams to 400 ounces. Nevertheless, the most available forms are one-ounce and ten-ounce bars. Given the current gold price is $1,800 per ounce, the investment in bullion is relatively expensive. Unlike stocks, investors are incapable of getting a fractional share of a bar. Due to the high price of bullion, investors should find a trustworthy dealer and pay for insurance and delivery.


Gold bullion can be purchased in different ways, but most investors prefer making a purchase from an online dealer. Make sure to check this Monetary Gold review to see the services offered by dealers of precious metals. It’s of the utmost importance for aspiring investors to keep track of the spot price of gold in order to choose the most favorable time to make a purchase.

Different Methods Of Gold Investment - Gold Bar

Regarding coins, their prices might not correspond exactly to the content of gold. In-demand coins usually trade at a premium, meaning you should shop for the best deals. Coins are sold by online dealers, local collectors, and pawn shops. Nevertheless, the safest purchases are made by using a licensed dealer.


Investing in jewelry is considered the riskiest unless you check its authenticity. It’s paramount to purchase such jewelry from a reliable investor and be provided with the necessary documentation, which will be helpful upon deciding to resell the piece. Additionally, investors are required to pay a certain markup amount, starting from at least twenty percent. The purity of jewelry pieces is also important, as low purity reduces their melt value.


The risks involved in gold bullion investments are mostly related to the possibility of having your assets stolen unless you keep them properly insured and protected. Another drawback is the potential difficulties you might face when selling the bullion and not receiving the entire market value for your assets. Individuals in a hurry to sell their coins might settle for a lower price.


Futures and options

Probably the riskiest way to invest in gold is by trading futures and options, which is known as a method of speculative investing. Click here to learn more about trading gold & silver futures contracts. A futures contract refers to an agreement to purchase or sell a particular security for a given price on a certain date, irrespective of the momentary conditions on the market.

Different Methods Of Gold Investment - Gold Bullion

An options contract, on the other hand, refers to an agreement that provides investors with the option to purchase or sell securities upon reaching a given price on or prior to a given date. Individuals interested in investing in futures and options need to set up an account at an online broker offering such contracts. Account holders are usually required to sign extra forms that acknowledge the risk of investing in such derivatives.


Once your brokerage account has been set, you can purchase and sell futures and options directly through the platform. The largest number of such platforms charge a commission for all futures and options. Investors who decide to invest in this commodity through futures and options contracts must monitor their assets continuously in order to sell or roll them over prior to their expiry.


The most important advantage of trading futures and options is the leverage amount you can take advantage of. In layman’s terms, investors can own plenty of gold futures for a small monetary sum and earn plenty of money in the short term if they start moving in the right direction. Individuals should also keep in mind that the leverage might work in the opposite way. Visit this site, https://www.forbes.com/advisor/investing/what-is-leverage/, to check out different definitions for leverage in business, finance, and investing.


For instance, if the price of gold moves in an unwanted or unplanned direction, you will have other alternatives but invest plenty of money to maintain the margin (contract). Otherwise, the broker won’t hesitate to close your position and you will take a loss.

Different Methods Of Gold Investment - Gold Ore

Even though the market of futures provides investors with an opportunity to make large profits, you might lose them in the blink of an eye. Consequently, such market trades are more suitable for sophisticated and experienced investors, not newbies.


Mining stocks

Another common method of such investment is the purchase of mining stocks. It’s basically investing in the stock of companies whose job is to mine and trade gold. Given such an investment involves stock purchases, investors need to use their brokerage accounts. The shares of these companies have a correlation with the price of gold, but these are also determined by the firm’s current expenses and profitability.


Moreover, the investment in mining companies involves almost an identical level of risk to investing in other types of stocks. Hence, these stocks might undergo a certain amount of volatility. Not all miners are reputable, meaning you should be cautious when choosing the right partner. Investors are strongly recommended to avoid small mining companies and those that haven’t dug any gold yet.


The bottom line

Regardless of the method you opt for, gold will always be a smart investment!

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