Invest in gold

Invest in gold

Why choose gold?

Gold has existed for thousands of years and will probably always be around. In addition gold has been a global currency of sorts for centuries. Due to only a finite amount of the stuff being on this earth is is a finite commodity. As a result during times of high demand, the low supply causes it's value to rise. During times of economic uncertainty, such as the global credit crisis the price of gold usually rises significantly. As a result, when equities markets are volatile and the outlook looks bleak, gold can be a great place to put your money.

How to invest in gold

Buy Gold bullion

This is perhaps the most appealing way to invest in gold, if not the most practical or cheapest. There are many brokers, dealers and mints that allow individuals to invest in gold bullion or coins on various scales from simple one ounce bars to the 400 ounce gold ingots you'll have seen in the movies. If you don't have enough to buy a whole gold bar many offer joint ownership schemes where you can stipulate exactly how much you want to purchase down to the last gram. For obvious security reasons you don't want to store gold bullion under your bed so most such dealers incude a secure storage premium. This storage fee can push the price up as will buying in small quantities.

Buy Gold Coins

Buying gold coins is perhaps one of the most popular ways to invest in gold. Gold coins such as American Gold Eagle coins, Gold Maples, Gold Krugerrands are a tremendously good way to speculate on gold prices. Their main advantage of investing in gold bullion is that they are much easier to buy and sell. They are available from virtually any coin dealer as well as even more accessable places such as online auction sites, antique shops and even porn brokers. Infact investing in gold coins can often become as much a hobby as an investment. Many investors find they begin to enjoy collecting different coins from different countries and end up viewing their investments as more of an antique collection than a pure financial investment.

Buy Gold Stocks

A more conventional approach (and more familiar for the equity investor) is to simply buy the stock of gold companies. Such companies can have many varied activities such as gold mining companies and/or gold exploration companies. By investing in these companies you are not only investing in the price of gold but are also exposed to some of the normal fluctuations that any listed company will experiance such as; management culture, operational risks, financing risks, research and development skills etc. Obviously the risks are very different as not all such companies will prosper during times of rising gold prices.

Assuming you are already a stock investor comfortable with stock picking then investing in gold related companies can be a great way to learning to trade commodities and diversify your equity portfolio without moving too far out of your comfort zone.



Invest in Gold ETFs

Gold Exchange Traded Funds (ETFs) can be thought of as an indirect investment in gold. You are actually buying an investment in a fund which inturn invests in either gold or gold related companies. You have no control over whatr the fund will invest in as all investment decisions will be made by the funds manager. All ETFs will be themed so for example you might choose a fund that invests in the bullion itself or one that invests in mining companies related to the gold industry, or even one related to various commodity markets. The main advantages to ETFs is that they can be bought and sold very quickly and cheaply just like a regular share or stock. There are now liquid markets for Gold ETFs and it is now possible to buy and sell ETFs through many of the most popular online stock brokerages.

Buy Gold Futures

Gold futures are a higher risk way to invest in gold that should only really be used by the seasoned investor. In simple terms they are a contract where you either buy or sell a set amount gold at a fixed date in the future at a pre-defined price. In other words they allow you to gamble on the future price of gold, allowing you to speculate on the price of gold either falling or rising.

One advantage to the investor of futures is that they allow you to leverage your bet. In order to buy them you have to register with the exchange where the futures are traded and put down a deposit or margin. At the end of each days trading you are required to meet your margin calls (re-adjust your margin) accoring to your profit or losses for the day. This margin is like an insurance incase your positions move wildly against you. As discussed above, because of this leveraged approach, your profits and losses can quickly become very large and as a result gold futures should only be traded by the very experianced investor.

Buy Gold

Gold has been around virtually since civilised society and has always remained a global currency in its own right. Due to golds limited availability it will probaby continue to do so for many more hundreds of years. As a result investing in gold whether it is via jewellery, coins, bullion, stocks or funds can be a great option in the long run, especially when the equity markets are on a downward trend.