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Gold has always been a popular metal to invest in and still is today. It has been a hot topic recently as it looks like inflation will increase substantially and the US dollar will lose more of its value. People who are always bullish about gold as the best and sometimes the only investments to make are called “gold bugs”, and there are more ways today to invest or trade in gold then ever before. Here are the most popular ways to own, trade and invest in gold.
If you were to buy gold coins or bars yourself, you would have to consider paying shipping and the storage costs if you wanted them stored in a safe deposit box or some other safe place.
You don’t have to worry about these things when buying an ETF. One of the most popular and heavily traded exchange traded fund is GLD. It roughly tracks the price of gold and is usually 1/10 of the price of gold per ounce. So if gold is at $900 per ounce, than GLD will be about $90 per share. Another similar ETF is IAU. GLD has far more trading volume than does IAU and when trading in stocks or ETFs, the higher the volume the better. There are all kinds of ETFs for gold you can invest in, for example there are ones that are called 2x (double long and that symbol is DGP). This means that for every $1 gold goes up, these funds go up twice as much. That of course means the reverse is true and you can lose your money twice as fast.
When you invest in a gold ETF you are not actually buying gold. You are buying an instrument that tracks the price of gold. You cannot call them up and say you want your gold bars now and take possession.
You can also invest in ETFs that own only gold mining stocks or you can find the gold mining companies yourself and invest in them. There are many mining stocks to research and invest in. This way you are not investing in the gold itself but buying the companies that find and dig up the precious metal, and like any other company you need to look at their balance sheet and see how they are doing. You have to look at the price of gold and how much cash the company is using to mine it, is it worth the mining of gold at certain times. Since these companies like any other company have operating costs such as payroll, equipment and land you have to read their balance sheets. Some of the larger mining companies are:
There are many small mining companies you can look at but most of these would be considered more speculation than investing in gold. You can invest in the most popular ETF for gold mining companies is GDX. Buying that ETF you would spread your risk out among numerous mining companies. There is also a popular ETF that invests in small or junior mining companies. This is the Market Vectors Junior Miners ETF with the symbol, GDXJ.
You can invest in gold coins or bars, both are bullion. When you want to buy and invest in gold you are looking for a practical way to buy, own and sell it when necessary. When buying gold from a dealer and sometimes a bank this way, there will also be a commission charged called a premium. So you pay the price of gold and also the commission. You can also buy gold in half ounce, one-quarter ounce and a tenth of an ounce to as small as 1/20th of an ounce. The smaller the amount of gold you buy the larger the premium can be which can make it double the price of gold by the time everything is done and paid for.
A coin such as the American Gold Eagle and the South African Krugerrand have some silver and copper in it for durability, but the gold content is equal to a 1 ounce piece of gold. Sometimes a certain coin will become scarcer and those prices will have a higher premium. With the American Eagle gold coin, there is a difference. The mint produces and sells the proof and uncirculated coin for collectors and there is also a bullion version. When investing in only gold you want to look at the bullion coin. In March 2009 the US mint has suspended the production of the collectable coin and is focusing only on the bullion coin due to an unprecedented demand for the bullion coin. Sometimes certain gold bullion coins will cost more than others when you add in the premium, so look around for the coins that are closest to the spot price of gold. Here are some other gold bullion coins.
When you buy older gold coins you are also buying a collectable coin, which can also rise and fall on the value of the coin and the price of gold. Unless you’re knowledgable about coin collecting, you should stick with the gold bullion bars and coins. And make sure you are dealing with a reputable gold or coin dealer. Invest some time and research them.
Gold is not the only precious metal you can invest in, there is also silver, platinum and palladium.
© 2009 Sam Montana
Thank You. I should have included jewelry. Selling jewelry for the gold content should be done at a reputable local dealer. I wouldn’t recommend those traveling buy your gold jewelry companies that have the full-page ads. Use your local Better Business Bureau to check out the local companies first. Jewelry should be bought because you like the piece and not for an investment in gold. There are a lot of small gold mining companies around known as junior miners. When speculating in those it has to be with money you are willing to lose, not the money you buy food with or even invest with.
My strategy on gold is right now it is not a good investment. Why? While it has use, the utility per dollar ratio is skewed and it is a seller's market in a time of fear. My collection is chunks of copper and nickel and I buy them from local companies that make things - and pay a little under spot rate, since I buy their scrap. I've got a nice big set of boat anchors that are old cylinder heads - stripped of the steel and safely secure in big welded boxes someplace - ...if currency falters (as is ALWAYS the case, fiat / prima facia currency is a faith or belief, not a value. Paper folks is paper, and no matter how shiny, how many tons of gold is really used by key industries and will they buy your coins? COPPER? Valued for utility ALUMINUM and NICKEL and a lot of others - hell, my genius-cousin retired from Hughes and his credentials include team leadership for Apollo through Hubbel imaging systems and sensor arrays for wide spectrum optics... not a dumb guy. He has a small box - somewhere, full of pure pure pure gold - silicon chips of the highest medical/mil-spec purity. They make a ton of gold look like a shiny ton of gold They make the world work. But the real commodities are our kids - invest in them and you will always have a place to live. JH
Gold is a good investment right now but Forex Trading has become the buzz word after the recent crash in the stock markets. Learn Forex Trading it’s not difficult.
Per usual, a solid and comprehensive report! My 2-cents' worth: be very careful about speculative investing in gold or precious metal mines, as Sam suggests. Long time back, a buddy got bit by a mine that promised a Mother Lode and delivered - well, 2 cents.The promotion was much greater than the findings....Also, you didn't mention it, but many people are buying and selling gold jewelry, as there is a pretty healthy market for it. Same rules apply though - get a valuation from a reputable jeweler or dealer. Buyer & Seller Beware: There are many sharks swimming in the golden sea....