Gold Investment: Ways to Invest in Gold


Investing in different instruments serves to grow your portfolio and diversify it; to safeguard your investments. In most cases, people look for safe-haven products like Government bonds and treasury certificates. Though the safety of the investment is paramount, there is also the need for growth. Hence, Gold is considered an avenue to invest that is less volatile than stocks or Forex. Also, you can invest in Gold in different ways. But each method has its own risks and returns for the investor.

So this post, we will give you different ways to buy and invest in Gold. Moreover, you will also learn about how to invest in Gold so that you can take more advantage of the precious metal in diverse ways.

What You Need to Know About Investing in Gold

1. Gold As a Commodity

Every investment product’s price is determined by demand and supply. Also, if you want a product to rise in price, then it must be scarce. You mine most of the gold from rocks. And the largest producers of gold in the world are China, Australia, and Russia. Besides, you use gold for making Jewelry, in the aerospace industry, for medicine, dentistry, and electronics.

Furthermore, Central banks globally buy Gold and hold it as a store of value. And the US government is the largest holder of Gold today. Also, Germany is next to the Us and the International Monetary Fund is third on the list. Moreover, private investors buy gold as a form of investment.

2. Why Do People Invest In Gold?

Investors buy gold instead of keeping a large amount of cash if they suspect there is a recession, uncertainty in a country, inflation or depreciation of a currency in the economy. Also, they hold a position in gold as insurance when the financial market is going down.

The value of Gold has been rising over the years. But it struggled in the 1990s, and in 2011 gold had trended down yet investors trust it more than some other means of investing.

Steps or Ways to Invest in Gold

Below are the ways or steps to invest in gold:

1. Buy Physical Gold

If you are thinking of how to invest in gold, then you can start buying physical gold. And as you do that, you will gain experience by buying Gold Jewelry, Coins, or Bullion. Also, gold bullion’s price is usually close to the price of gold.

And Gold bullion is purely created for investment purposes. And if you want to buy gold bullion, you must pay premium prices that start from 3 to 10 per cent. You will also need to store it in a vault or a deposit box in a bank.

Besides, you can also buy real gold online, in a Jewelry store or another store that sells gold. When you buy Gold, do a test to confirm that it is real and that the price is fair. In addition, you can get real gold online. But make sure you do not store pure gold at home due to security concerns.

2. Buy Gold Futures

Traders trade Futures in recognized exchanges all over the world. Futures contracts let you buy and sell an underlying commodity at a set time in future and at a price from the futures contract. Also, we have Futures in different commodities. One of which is gold. You have covers of 100 troy ounces of gold that you can trade in that exchange.

If you want to trade in Gold, you must deposit an initial margin or the smallest amount you can use to open a position. And daily your position is marked to market. That means if the price goes up you make money and if it goes down you lose money. Furthermore, If your account drops below the maintenance threshold, you must transfer money to that account to satisfy the initial margin.

And your account balance must be equal to the original margin and lower than the amount of the whole contract. You need to learn more about the terms like “Bakwardation, and Contago” to invest in Gold futures.

3. Invest In Gold ETFs

Another way to invest in gold is to buy exchange-traded funds (ETFs). You can invest in Gold ETFs if you don’t like gold futures. So rather than buy Futures contracts, you can buy shares of ETFs and you will have exposure in Gold.

To start investing in ETFs you must choose a Brokerage firm and open an account and then select any  ETF you like. Choosing a gold ETF company to invest in might cause you to pay a certain per cent annually and it is usually around 0.40 per cent annually just to keep your account. Also, ETF follows the price of gold bullion.

4. Invest in Gold Mining Companies

When you invest in a gold mining company you will be exposed to gold, although the exposure may be limited sometimes. These companies have operating risks that are not correlated to the price of Gold. So regardless of the price of gold these gold mining companies can suffer operating problems and be at the risk of default. If that happens, then the company won’t be able to pay you back your initial investment in or pay you dividends.

Conclusion: You can start by buying physical gold, trading futures, and investing in a mining company. But out of all this, investing in ETFs is the best way you can invest in Gold. Also, if you don’t like to buy futures or maintain margins, then buy shares of an ETF and watch the price of gold bullion closely. Gold is a liquid instrument and its transaction cost is low. So, you may buy ETFs among all the methods for investing gold that we have discussed here.
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