Kyle Jernigan - August 02, 2021

Guide to Investing in Gold

Guide to Investing in Gold

With uncertainty surrounding the stock market, investors are looking for alternative investments to add to their portfolio to protect it from downside risks. They have been piling into assets like cryptocurrencies, private equity, and real estate.

However, one alternative investment seems to stand the test of time, and that is gold. According to recent information from gold.org, they noted "We believe investment demand (for gold) will remain well supported" as the economic recovery takes place from the aftermath of the pandemic.

If you're interested in investing in gold, keep reading this guide and learn how to invest in gold for beginners and start generating a profit.

Why Invest in Gold

Since its discovery, gold has been viewed as a sacred and cherished metal that holds a special kind of value to those who hold onto it. It has been used to make fine jewelry, as a sign of royalty, and as a form of currency.

Several different cultures and nations throughout history have used the precious metal for various reasons. But one thing has always remained true - Gold is looked at as something that holds value. Whether that value is from the jewelry or used as a form of currency, gold is considered a valuable metal.

This is what attracts investors to dedicate a portion of their portfolio to holding gold because it is valuable. Investors have also labeled gold as one of the safe investments for when inflation is running rampant and creating adverse effects on the economy.

A pile of Gold Coins

Gold comes in all types of shapes and weights. Helpful for Gold Stackers on any budget.

How to Invest in Gold

When you decide it's time for you to invest in gold, there are several different options you can choose to get started making a profit. Here are a few of the most popular gold investments that investors generally allocate their money towards:

Physical Gold

One of the more popular ways of investing in gold is to hold onto the physical gold yourself. This can be done by purchasing a form of gold such as:

  • Gold Coins - Coin denoting a circular piece of metal minted, backed and guaranteed by an official world Government. Usually found in 1 troy ounce size.
  • Gold Bars - Bar denoting the rectangular shape, generally produced by a private mint. Bars tend to have a lower premium and have a large range of available weights. From 1/2 of a gram all the way up to 400 troy ounces in size.
  • Gold Rounds - Round denotes a circular piece of metal minted by a private mint. These are usually facsimile of or remakes of old iconic designs but some mints put their own branding on them. These generally come in 1 troy ounce size and are cheaper than there Government "Coin" counterparts.

This is one of the easiest ways to purchase gold and begin to invest in it. You can invest in several different forms by buying a gold crate, such as American Gold Eagles, Gold Canadian Maple Leafs, or even South African Krugerrand Gold Coins. If you're unsure which form to get started with, you can always opt to invest in a few different forms with something like the Gold Crate.

You can purchase these gold items and store them the way you'd like. You can put them in a safe to protect them, or you can decide to store them somewhere else safe. Gold coins are considered a more liquid investment as you can sell some if needed and keep the others. With gold bars, selling becomes a bit more challenging as it will typically cost more due to its weight.

Gold Coins different sizes

From left to right: 1/10th oz Gold Coin, 1/2 oz Gold Coin, 1 gram Gold Coin.

Gold Mining Companies

Did you know you can also invest in gold mining companies? These are the organizations that go out and physically mine for gold.

Gold mining companies are listed publicly on stock exchanges for investors to purchase shares and invest in just like any other stock. However, it's important to note that the value of gold mining companies is often reliant on different factors such as:

  • The current price of Gold
  • Cost of production
  • Research and development
  • Level of Gold reserves

These factors are critical in assessing the value of the gold mining stock. It would be best also to consider the management team and what they can bring to the company to produce results. A few of the more popular options for gold mining stocks that investors prefer to invest in include Newmont Mining, Barrick Gold, and Wheaton Precious Metals. 

1/10th oz Gold Coins
PAMP Suisse Gold Bars
Multiple Gold Coins

Gold Mutual Funds or ETF's

If you would like to stick with the gold stock's you can also invest in a gold mutual fund or ETF to increase your exposure to gold and indirectly invest in it.

Gold mutual funds give investors a chance to hold a gold investment without buying and storing the physical gold yourself. Instead, mutual funds and ETF's will invest in assets that are pertaining to gold. This is a popular investment option for investors looking to protect their portfolios from downside risks, as gold is often viewed as a protection from inflation.

You can invest in mutual funds through a financial institution, and gold ETFs can be bought on the stock exchange like any other gold stock. The most prominent example of a Gold ETF is the SPDR Gold Shares (GLD) that trades on the NYSE.

Gold Option Contracts

Another popular option for investors to increase their exposure to gold is to purchase options on gold futures. Stock options are contracts that state a specific amount of stock to be bought or sold on a particular date.

However, it's essential to keep in mind that options contracts can expire worthless if the contract isn't exercised by the expiration date. This makes gold option investing a bit more challenging and is not recommended for beginners. Instead, gold option contracts are used as a hedge to protect investors' portfolios from things like inflation and increasing monetary policy.

Gold Jewelry

A more straightforward way to invest in gold for beginners is to buy gold jewelry. Pure gold jewelry will also increase in value if the price of gold is rising. Gold jewelry can make a great addition to investor's portfolios and can also be used and worn if desired.

However, it is important to note that Jewelry carries massive mark ups so the potential for gains are much lower than low premium Gold bullion such as Bars, Coins and Rounds would be.

Gold Alternative Investments

There have been several new investments that are catching investors' attention. Arguably the most popular alternative investment that investors allocate their money towards is cryptocurrencies like bitcoin and ethereum.

Now they have gold-backed cryptocurrencies where the price of the token or coin represents the price of physical gold. If you prefer to invest in crypto or are looking to try a new way to increase your exposure to gold, this may be the investment for you! But remember, you can not physically possess cryptocurrency.

It's Time to Start Investing in Gold

If you think you missed the gold rush, think again. Investors are always looking for new ways to start investing in gold and for additional ways to diversify their portfolios with the intent of capturing more profits. These are a few of the ways you can join in on the fun and start making some extra money.

Getting started investing in gold is easy. If you are interested, contact us today, and we can help you get started!