Editor: This article should help those interested in getting started in gold investing answer questions such as, "How do you buy gold?", "What are the types of gold investments?", "Do I have to buy physical gold to make money?", and "What is the best place to buy gold?".
An investment in knowledge always pays the best interest. With the gold market giving high benefits in the current market disaster, people are giving much thought on acquiring assets in the form of gold as an aid to long term profit. Considering the excitement in the bullion market, it is worthwhile to discuss some of the major methods available for investing this yellow metal.
1. Gold coins and bars
Investing in coins seems to be one of the most recognized methods of gold investment. Some of the well accepted and authentic coins in gold are American Gold Eagle, American Gold Buffalo, Gold Maple Leaf, South African Krugerrands, Philharmonic, Panda etc. Gold coins are aimed at small time investors. Gold coins are of two types – bullion coin and collector coins. The major difference lies in their price. Collector coins come at a higher premium than the original bullion rates. The greatest advantage of coins is ease of availability, portability and conversion to cash. Like coins, gold bars are also acquired by investors. Available in a variety of shapes and sizes, bars are just as popular as coins. In some countries, these bars can be easily bought or sold in bank counters. Even dealers provide the same service at the same rates. Bars are also easily available and converted to cash as needed. People who enter into this market are generally advised to start with coins and bars. Both can be owned either through personal safe keeping or through bank vaults. Also, coins and bars give the physical feeling of owning real treasure in hand.
Here is a beginner's guide to investing in gold coins and bullion.
2. Gold Exchange Trade and Mutual funds
Stocks, mutual funds and gold exchange trade funds are yet another way of investing in gold. Here the ownership of gold is bought and sold through Stock Exchanges. The much recent exchange trade funds are being recognized much more than the other two methods. The possible reason lies in the shares being held by each of these methods. While Mutual funds holds stocks of other types of companies, the Gold exchange trade funds invest in gold related company’s stock or even in real gold. People who decide to invest huge amount in this business generally opt for Exchange trades as they encourage investors to buy and sell gold very close to the spot price of the underlying metal (gold/silver) which in turn give high returns to the investors. Online Stock brokerages are also available for selling and buying gold. But care should be taken against possible scams by fraudulent dealers. One small drawback of this method is the absence of physical gold which some people give much importance. Everything here is a paper document as opposed to the actual gold coins and bars. Nevertheless, Gold ETFs are gaining wide acceptance as an efficient way of tracking gold prices.
3. Gold certificates
Considered to be one of the oldest forms of paper investment in this yellow metal, certificates stand for the ownership of Gold. The holder of the certificate is entitled to the specified gold and he has the authority to trade in his wealth according to demand. Government or other major financial society issues the gold certificate. A central repository of gold is maintained by the Government. The absence of physical gold makes gold trading hassle-free. Still, many believe Gold certificates are not a wise option as a financial disaster or government failure can adversely affect their investments.
4. Gold Investment accounts
Large investors generally eye this option, as these are backed up by banks of high reputations. These accounts operate like any other savings accounts in which the account bearer can credit money as balances of gold increase and withdrawal options are either as gold or as equivalent currencies. These accounts are opened for investors willing to put in a substantial amount, such as a couple of million dollars. Hence beginners who won’t be willing to put in such a significant amount are not provided with this option. Banks provide the account-bearers the ability to buy and sell gold at the spot price, resulting in high gains for the investors. Unlike general bank accounts, no interest will be paid to the account holders. Also a nominal administrative fee will be levied each month. A similar procedure is followed for the digital gold currency accounts and Bullion Vaults gold exchange.
5. Gold mining accounts
This is yet another way of investing in gold for high future returns. Only experienced investors venture into this option and this is tagged with high risks of losing the invested money. An increase in gold price will not guarantee high gains in mining shares. Thorough research and extensive knowledge of mines are very important in investing in Gold mines. Click Here for a great introduction to investing in mining stocks.
Here is another guide to investing in gold stocks.
6. Gold ornaments & jewelry
Probably the least known of all these methods, investments in the form of gold ornaments are catching up in the market slowly. Many developing countries like India buy gold ornaments both because of its aesthetic appeal as well as because of its status as a form of wealth. One of the disadvantages of this option is the need to pay a significant premium to buy in a jewelry form. While it is exciting to wear gold, this is not considered much as an investing option.
