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5 Ways to Invest in Gold
One of the leading ways to diversify your portfolio and secure your financial future is to invest in gold. Unlike other financial assets like stocks and bonds, its value is not affected by inflation and other economic uncertainties. In fact, when the U.S. Dollar depreciates in value, the price of gold often increases. The first thing that comes to many people’s minds when you mention gold investment is physical gold. Sure, purchasing gold in this form, is the most straightforward way to benefit from its increasing price. However, there are other options worth exploring as well. Continue reading to learn all the options available, and find out which gold investment suits your personal objectives and strategy.
Physical gold is worth owning because it’s a universal currency that is held by most central banks. It’s the only real money whose value cannot be controlled by the government. It’s value rises based purely on supply and demand. Similar to a family home, buying physical gold shouldn’t be regarded as an investment as such, but rather a form of insurance policy, or saving for a rainy day. It’s a good way to preserve wealth and pass it to the next generation, so don’t trade your gold. Once you have gold bullion in your investment portfolio, then you can consider other investment options like, stocks, real estate, bonds etc. There are two main ways of investing in physical gold, which include bullion bars and bullion coins.
This is the most preferred form of investing for governments, financial institutions, and individuals with lots of money. This is because the amount of gold in these bars must be over 99.5% in purity in order to qualify as investment grade. The bars generally have large sizes, and come from trustworthy refineries and mints. You can acquire them at small premium over the spot price. Note that they can be risky to keep in your house or carry around.
If you’re a small investor, you might find bullion coins more preferable. You can get these coins at different premiums depending on your location. For instance, if you shop smartly online, you can be able to buy some easily at small premiums. You should however be very careful of the type of coin you buy, since different coins have different quantities of gold purity, which can affect the price drastically. Modern bullion coins allow both small and big investors to own legal tender coins at a small premium to the spot price of gold quoted on the markets. Most popular gold bullion coins include, American Eagles, South African Krugerrands and Canadian Maple Leafs.
Allocated Gold Accounts
These types of accounts are for those who like to own physical gold, but don’t want to deal with the headaches of storing the gold themselves. Once you buy the gold, a bank will keep it safe for you at a fee. The gold cannot be used for any other purposes by the bank.
Unallocated Gold Accounts
If you want your physical gold to be stored by a bank without attracting storage costs, you might want to consider unallocated gold accounts. They come in a wide variety of sizes and forms, and involve gold certificates which you hold to symbolize your position of ownership. This type of investment is a lot riskier, since a bank can do whatever it pleases with your precious metal. In case something happens to the bank, this account isn’t covered by the government most of the times, though it guarantees you of its sovereign currency.
Gold Exchange-Traded Funds
ETFs offer a more convenient way to invest in gold. They’re a type of mutual funds (not funds in the “traditional” sense) backed by gold, which are listed on a stock exchange, and traded in the form of shares. Their main purpose is to track the price of gold; something that they’ve done flawlessly so far. There are administration fee associated with handling ETFs, which differ depending on your country. Examples in the United States include the Streettracks Gold Trust (identified with the ticker: GLD).
Digital Gold Currency
Also known as E-Gold, digital gold currency is a relatively new method of owning gold, which has a similar principle to Paypal. Your gold is kept in an online account, backed by physical gold. Apart from using your E-Gold to make payments, you can also redeem it into physical gold. This type of investment has however been criticized due to cases of hacking and fraud, which leave investors with little to no protection in the event that something goes wrong.
Overall, there are so many ways to make money from gold. Be sure to choose the investment option depending on your personal goals.