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How to invest in gold: 4 ways to invest in gold

Looking to invest in gold, here's how to diversify your portfolio with one of the most popular precious metals.

You have a few options here: You can either buy physical gold like bars or gold coins, invest in gold mining company stocks or a gold exchange-traded fund, or ETF, or buy into gold futures.

1. Purchase physical gold

  • Bars
  • Coins
  • Jewelry

The most straightforward way to put your money in gold is to buy physical gold like bars, coins or jewelry.

To actually make a profit off the precious metal, you need to have a reasonable expectation that your gold can be sold for more than you paid for it. Unfortunately, gold prices are notoriously difficult to predict.

In the 1990s, gold barely hit $300 on a good day. Then, as financial and political crises loomed in the mid-2000s, people did what they always do and started buying up gold, which drove up gold prices.

Its value more than doubled from $800 an ounce in 2009 to $1,900 in 2011. But by 2013, the bubble had burst and gold was down to $1,300.

Then in the summer of 2020, during the stress and uncertainty of the pandemic, gold briefly surged to an all-time high of $2,000 an ounce before sinking back down once again.

If gold forms part of your retirement plan, you can actually buy it through a gold individual retirement account, or IRA. That said, you’ll need to set it up with a special custodian or broker; be aware that you may be charged fees to cover the cost of storing the metal.

2. Invest in gold stocks

You can invest in gold without ever touching a flake of it by purchasing shares of gold mining companies on the stock market.

The advantage is that if the price of gold suddenly plummets, you may not lose your shirt because the mining company could decide to focus on another metal.

The disadvantage of owning mining stocks is that they can decline with the rest of the market, even when the value of gold is steady. In fact, business factors can always come into play — factors like the company’s financials, the quality of its management team and long-term production prospects.

You can easily invest in commodity stocks through any number of investing apps — although a few will give you a free stock just for signing up.

3. Invest in gold ETFs

Investors might buy into gold exchange-traded funds to avoid the uncertainty that comes with investing in a particular company.

Put simply, these funds are pools of money from investors that are poured into a variety of gold and mining companies. ETFs are traded like stocks; some of the most popular gold ETFs are GLD, GDX and GDXJ.

You will have to be prepared to lose a certain percentage of your investment’s value every year to the fund’s expense ratio. For example, with the largest gold ETF, SPDR Gold Shares, you’ll be charged 0.40% of your investment’s value each year.

Still, ETFs as a whole have very low management fees, and you save even more by buying them through an investment app.

It’s also important to note that there’s still a measure of uncertainty when investing in ETFs. Although these funds are heavily diversified to reduce risk, they are subject to the fluctuations of the stock market.

If the market crashes, the value of your investment could drop even if the value of gold doesn’t change.

4. Buy gold futures

Gold futures are very complicated. They’re contracts in which you agree to buy a set amount of gold at a specific price some time in the future.

According to the Wall Street Journal report, The most-actively traded gold futures contract rose 0.6% to $1,975.20 a troy ounce last week after the Federal Reserve lifted interest rates to a two-decade high.

Traders can strategically buy and sell futures contracts to profit from the changing price of gold.

Buyers of futures contracts profit when commodity prices rise. Sellers of futures contracts profit when commodity prices fall.

The contracts typically require a minimum purchase of 100 ounces of gold. Novice investors should exercise extreme caution with futures contracts due to the high degree of borrowing typically involved.

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