GLD invests only in bullion, giving investors direct exposure to metal price movements. Other funds invest in both ingots and shares of publicly traded companies in the gold mining, refining or production business. In general, gold stocks rise and fall faster than the price of gold itself. There are many ways to invest in gold.
You can buy physical gold in the form of jewelry, ingots and coins; buy shares in a gold mining company or other gold-related investment; or buy something whose value derives from gold. Each method has its advantages and disadvantages. This can make it overwhelming for beginning investors to know how best to expose themselves to this precious metal. Buying gold mining stocks is relatively simple, through a brokerage account with an online broker or investment application.
Once you add funds to your account, you can choose a gold stock and place an order. They receive the right to buy gold at a fixed price (streamers) or a portion of the income derived from gold (royalties), reducing their risk compared to gold mining stocks. According to the IRS, it's not legal to store your gold IRA in your home; you can't just bury your gold in your backyard or store it safely in a safe. We'll explore all the ways you can invest in gold and discuss their advantages and disadvantages so you can learn more about investing in gold.
This means that the value of mutual funds and ETFs in gold may not fully match the market price of gold and that these investments may not perform as well as physical gold. Gold ETFs focus on owning physical gold or the shares of gold mining companies, creating different risk profiles. So, should you go for the gold? Although it usually becomes part of the conversation during times of economic crisis or political uncertainty, gold as part of your portfolio makes sense at any time as a diversifier of your shares, if nothing else. While investors should weigh each option to determine the best method for their circumstances and their risk tolerance, gold price ETFs and streaming and gold royalty companies are often ideal options for beginning gold investors.
However, keep in mind that gold company stocks are correlated with gold prices, but they are also based on fundamentals related to each company's current profitability and expenses. As a government equivalent currency, some banks and investment companies continue to issue gold certificates that grant the holder ownership of part of their gold holdings. Instead of investing in a mutual fund, you can also buy shares of gold mining companies (often referred to as gold stocks) directly. Depending on your preferences and ability to assume risk, you can choose to invest in physical gold, gold stocks, gold ETFs and mutual funds or speculative futures and options contracts.
When buying gold jewelry, keep in mind that the price you pay will be linked to the craftsmanship of the piece and that the amount of gold it contains will be only a percentage (carats) of its total weight. This helps investors seeking the safety of gold and protection against inflation to benefit from an investment in gold with more liquidity than a physical investment in gold. When stock market investments plummet or the economy is in recession, the price of gold often rises, making gold an excellent complementary asset to your other investments.