Gold has been a valuable and sought-after commodity for thousands of years, and it continues to hold a special place in the modern investment landscape. With its ability to act as a hedge against inflation and economic uncertainty, many investors are drawn to the shiny metal as a way to diversify their portfolios and potentially earn a profit. But with so many different ways to invest in gold, it can be hard to know where to start. In this list, we’ll explore the five most popular ways to invest in gold, from physical gold to gold royalties, and discuss the benefits and drawbacks of each. We’ll also give tips and specific stock recommendations so you can employ each of the various gold strategies now. So whether you’re a seasoned investor or just starting out, read on to broaden your knowledge and learn how to strategize to maximize results from your position in gold.
Physical Gold
- Investing in physical gold involves purchasing gold coins, bullion, or bars. This type of investment is popular because it allows investors to own a tangible asset. Physical gold is also a good option for investors concerned about inflation or economic instability. One of the drawbacks of physical gold is that it can be difficult to store and transport, and there may be additional costs associated with insuring and protecting it.
- Bullion is typically sold by gram or ounce, and the purity, manufacturer, and weight should be stamped on the face of the bar. Purity is very important when buying gold: Investment-quality gold bars must be at least 99.5% pure gold. You can buy gold bars from dealers and individuals or online from sites like JMBullion, the American Precious Metals Exchange (APMEX), or SD Bullion.
VanEck Merk Gold Trust (OUNZ)
A unique option for investing in physical gold is the VanEck Merk Gold Trust. This $700 million fund from VanEck takes physical gold to another level by allowing investors to redeem their funds and then take delivery of physical gold based on the amount they have in this ETF. The minimum shipment size is one ounce, and there are obviously fees and delays for shipping. But the option for physical delivery if and when you want it makes this fund very attractive to some.
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Gold ETFs
- Gold exchange-traded funds (ETFs) invest in gold and trade on stock exchanges like a stock. This type of investment is popular because it is easy to buy and sell, and it provides investors with exposure to the price of gold without the need to own physical gold. Gold ETFs are also relatively liquid and can be easily traded throughout the day. One of the drawbacks of gold ETFs is that they are subject to management fees and other expenses.
SPDR Gold Trust (GLD)
By a wide margin, the largest gold ETF is the SPDR Gold Trust, the go-to way for investors looking to play the precious metal. It boasts roughly $59 billion in assets under management, roughly twice that of the next closest gold ETF, and regularly tops 10 million shares traded daily. It’s not the cheapest option out there based on annual expenses, but it is definitely the most liquid and established option. And as the fund is benchmarked to physical gold, you can get a direct play on gold bullion prices via this ETF. The fund charges 0.40% in annual expenses or $40 on $10,000 invested.
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Gold Mining Stocks
- Investing in gold mining stocks involves buying stocks in companies that mine gold. This type of investment can be more volatile than other gold investments because it is subject to company-specific risks and market conditions. One of the benefits of gold mining stocks is that they may offer higher returns than other gold investments if the price of gold rises and the company performs well.
Barrick Gold Corporation (GOLD)
As one of the largest gold mining companies in the world, Barrick has a diverse portfolio of mines located in some of the world’s top gold-producing regions, which helps to mitigate risks associated with any particular location. With a robust portfolio of assets and a track record of successful acquisitions. The company has a strong balance sheet and is focused on delivering value to its shareholders through operational excellence and strategic growth initiatives.
Barrick Gold Corp is up 21% over the past month and may have room to run. Analysts give the stock a Buy rating, and an average price target is $21.74, which represents a 16% upside. Considering the current market environment and the positive signals surrounding GOLD, it seems like a conservative estimate.
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VanEck Vectors Gold Miners ETF (GDX)
VanEck Vectors Gold Miners ETF is a stock-focused fund. While not linked directly to gold bullion, it allows investors to get diversified exposure to some of the most prominent publicly-traded gold mining companies. It comprises about 50 miners, including Newmont Mining Corp. (NEM) and Barrick Gold Corp. (GOLD).
Gold Futures and Options
- Gold futures and options are financial contracts that allow investors to speculate on the price of gold. This type of investment is popular among experienced investors and traders because it allows them to leverage their investments and potentially make larger profits. However, gold futures and options are also very risky and should only be considered by experienced investors who can afford to lose their entire investment.
- Gold futures are traded at the COMEX division of the New York Mercantile Exchange (NYMEX). The standard contract size is 100 troy ounces, with two additional smaller contracts at 50 and 10 troy ounces. The exchange specifies the delivery of gold to New York area vaults and is subject to change by the exchange. An account approved to trade futures is required in order to trade gold futures.
- Gold Royalties: Gold royalties are a relatively new way to invest in gold that involves purchasing a share in a gold mine’s future output. This investment provides investors with a percentage of the gold mine’s production revenue without actually owning the physical mine. One of the benefits of gold royalties is that they can provide a stable income stream even if the price of gold declines. However, this type of investment can be more complex than other gold investments and may not be suitable for all investors.
Sandstorm Gold Ltd (SAND)
SAND is a gold royalty company that provides upfront financing to gold mining companies in exchange for a percentage of the future production of gold. The company’s unique business model provides investors with exposure to gold prices without the risks and costs associated with traditional mining operations.
Recent financial results have been impressive, with strong revenue growth and improved margins. Additionally, the company’s balance sheet is solid, with a healthy cash position and no long-term debt.
Technically, SAND is showing bullish signals on the charts, with a 19% gain over the past month. The Relative Strength Index (RSI) is also in bullish territory, indicating that the stock has momentum on its side.
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In Summmary
Overall, the best way to invest in gold will depend on an individual’s investment goals, risk tolerance, and investment experience. Some investors may prefer to invest in physical gold for its tangibility and security, while others may prefer to invest in gold ETFs or mining stocks for their liquidity and potential for higher returns.
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