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Stockpiling gold has been a favorite investment of the wealthy through much of history, and gold remains the most popular investment of all the precious metals. Gold is fungible, portable, and accorded value everywhere in the world. This article outlines four waysto invest in gold. The most suitable method for you depends on the amount of money you have to invest, your investment objectives, the amount of risk you can absorb, and the length of time you intend to hold on to your gold.
Collecting and storing scrap gold has become a popular investment strategy. With gold prices steadily rising, buying scrap gold is a low-risk way to invest in this valuable resource.
: Low risk. Gold is the safest investment option available. The potential reward far outweighs the minor risk.
: Ideal for the first-time gold investor or for someone just looking to set something aside for a rainy day.
Ask family and friends if they have gold they are looking to get rid of. Practically everyone has broken necklaces, damaged rings, mismatched earrings and other forms ofscrap goldthat they would love to turn into cash. Work out a price they are happy with while leaving plenty of room for your profit.
Have an ad run in both the classified section and the help wanted section of your local paper. Most people who are looking at the help wanted ads are in financial distress of some sort, so placing an ad offering to help them make money by selling gold to you can work wonders.
This is similar to a newspaper ad yet is entirely free and has the potential to reach more people.
Gold items will often sell for less than their scrap value, making them a great investment tool. Be sure to factor in any taxes or shipping costs before bidding.
Leave your contact information with them and have them contact you if anyone comes in to sell gold items that the pawnshop doesnt want. Some smaller shops may not have access to a refiner or even want to deal with scrap gold.
Countries around the world (including the United States) continue to spend money they dont have, creating unstable economies. Gold bullion is the only true hedge against this kind of instability.
: For the long term, even if the economy picks up, inflation will follow close behind. Which asset resists inflation? Gold.
: Its low-risk. Experts agree that the investment-allocation pyramid is built on a low-risk base that includes gold bullion.
: Gold is a perfect component for a new investors portfolio.
Decide what type of investment-grade gold bullion you want to buy.
You have a choice of gold coins, gold bars, and gold jewelry.
: Historic (pre-1933) gold coins tend to retain the most value, as these have numismatic value in addition to their gold content.
Examples of historic gold coins that do not sell at an excessive premium over the gold price because they contain only 90 percent gold are the British sovereign, British guinea, Spanish escudo, French 20 and 40 francs, Swiss 20 francs, and American Gold Eagles ($10 face value), Half-Eagles ($5 face value) and Double Eagles ($20 face value).
The British sovereign and the American Eagle gold coin are notable exceptions with 91.66 percent gold content (or 22 karat). Other gold bullion coins include the Canadian Maple Leaf, the Australian Kangaroo, and the South African Krugerrand (which sparked the entire gold-coin-investment industry),
: Gold is also sold in bars that are usually 99.5 to 99.99 percent fine (that is, pure gold). Popular gold refineries include PAMP, Credit Suisse, Johnson Matthey, and Metalor. Youll see the names of these refineries stamped on the bars they process.
: The problem with buying gold jewelry as an investment is that you pay a premium for the craftsmanship and the desirability of the design. Any piece of jewelry marked 14 karat or less will be below investment quality, and any resale for the sake of investing will be impacted by the need to refine the gold. On the other hand, it is possible to pick up antique or vintage gold for very little at estate sales and similar auctions where a seller may not recognize the true value of the metal content or if people simply arent in the mood to bid much for it. Older pieces can carry more value due to their unique craftsmanship, so this can be a lucrative and enjoyable way to collect gold.
Clearly, the greater the weight, the greater the price. Something else to keep in mind is your ability to store the metal safely.
The American Eagle gold coin and the other coins listed above are made in four weights: 1 oz., 0.5 oz., 0.25 oz. and 0.10 oz.
Gold bullion bars are generally sold by the ounce and include 1 oz., 10 oz. and 100 oz. bars.
Often dealers, brokerage houses and banks will sell both coins and bars. When assessing a dealer, see how long theyve been in business, whether theyre certified with an industry or government body and in what investment activities they specialize. In the United States the national mint provides a list of authorized sellers that you can check.
SeeBuy Gold Onlinefor details on how to invest in gold through online marketplaces.
Jewelers sell gold jewelry, but if you decide to go this route, be sure to choose a reputable store that has been in business for a long time.
Auctions can be another source of gold jewelry, but be aware that auctioned items are sold as is. Its up to you to ascertain their value.
There are many sites online that will give you the current spot price for gold and other precious metals. Kitco is one such site.
Aim to buy gold coins or bars at or below the prevailing market price, plus a premium of approximately one percent.
Most dealers have purchase minimums, charge for shipping and handling, and offer quantity discounts.
Get receipts for all purchases and get a confirmation of delivery date before you pay for the bullion.
If purchasing jewelry, retain all receipts in a safe place. If purchasing at an auction, remember to add on a buyers premium and any sales tax.
Store your bullion securely, preferably in a safe-deposit box.
This is a very important aspect of investing in gold, because your investment strategy is only as safe as your storage strategy. Invest in high-quality security mechanisms, or pay a company to store the metal for you.
Those willing to absorb a bit more risk may decide to invest in gold futures. However, it is important to note that such a strategy isnt so much investing as it is speculating, which equates to gambling in some respects.
varies. In general, investing in gold futures is like making a short-term prediction of what the price of gold will soon be. However, many savvy investors invest and re-invest in gold futures over a period of years.
: High risk. There is high volatility associated with gold futures, and many inexperienced investors have lost money on them.
: Futures are primarily for seasoned investors. Very few novices make money this way.
Futures allow you to control a larger amount of gold than you have incash.
If the price of gold drops, you could end up owing more than you invested once commissions are added.
Gold futures are legally binding agreements for delivery of gold in the future at an agreed upon price. For example, you can buy 100 oz. of gold for a two-year contract worth $46,600 for as little as three percent of the value, or $1,350.
The commodity trading firm charges a commission for every trade.
Each trading unit on the COMEX (Commodity Exchange) is equivalent to 100 troy ounces.
Electronic trading on the Chicago Board of Trade (e-CBOT) is another way to trade gold.
Then you can collect your earnings or pay your losses. An investor can exchange a futures position for physical gold, referred to as EFP (exchange for physical). However, most investors offset their positions before their contracts mature instead of accepting or delivering physical gold.
When you buy a futures contract for a fraction of the actual cost of the assets involved, you are basically betting on a small change in the price of the assets. You can make a lot of money buying gold futures if the value of gold goes up relative to your currency, but if it goes down, you can lose everything you invested and possibly more (if your futures contracts do not simply get sold to someone else when you do not have enough money down). This is a way to hedge a risk or speculate but not in itself a way to build savings.
Some exchange-traded funds (ETFs) aim to track silver and gold prices and are generally bought through a stockbroker. They are much like derivative contracts that track prices, but they differ in that you will not own the underlying metal assets.
Two examples of ETFs are Market Vectors Gold Miners and Market Vectors Junior Gold Miners.
The Market Vectors Gold Miners ETF attempts to replicate (before expenses and fees) the yield performance and price of the New York Stock Exchange Arca Gold Miners Index. The portfolio contains gold mining companies of all sizes from around the world.
The Market Vectors Junior Gold Miners ETF debuted in 2009. This ETF has become quite popular among investors seeking to have indirect access to gold assets. Although similar to the Gold Miners, the Junior Gold Miners focuses on smaller companies involved in an ongoing search for new sources of gold. Because these companies are less established, there is more risk involved.
: Short term. There is a fee assessed each year that deducts from the amount of gold backing your investment, making this an expensive way to invest.
: Medium risk. Because a typical ETF investment can be short- term if you prefer, risk can be minimized.
Use the same broker you would use to buy stock, a mutual fund, or shares in a gold ETF, such as GLD and IAU on the New York Stock Exchange. A gold exchange-traded fund is designed to track the price of gold while maintaining the liquidity of a stock.
Note that gold exchange-traded funds do not give you the ability to physically control the gold. Therefore, some gold advocates believe this is an inferior way to own the commodity.
Another disadvantage is that ETFs trade like stocks, and you may have to pay a commission to buy and sell on the exchange. Moreover, any capital gains you realize must be reported for tax purposes.
Decide why youre interested in investing in gold.
If you have funds to invest, its important to understand why you want to invest in gold in the first place. Make sure its the right thing for you. Understand that gold mainly serves as a repository of value and as an investment hedge. Common reasons for investing in gold include:
Gold is always in high demand. It is a tangible product that can always be passed on without concerns for its desirability. Contrast this with antiques and collectibles, which are subject to fluctuations in fashion and style trends.
Owning gold can protect you from inflation or currency fluctuations. Countries often invest in gold when economic growth starts to decline. The more debt-laden an economy, the more it may have to pay for gold.
Gold can be another string to your bow when you seek to diversify your investment portfolio.Diversificationis another reason to own gold. This is a cornerstone of sound financial management.
Gold is an excellent vehicle for protecting wealth over a long period of time (provided you store it securely).
During a period of civil instability, gold is a way to protect assets. It is portable, easy to hide, and can give you something to hang on to when everything else is crumbling.
This says how to buy gold bullion, but how do I sell it when the price for gold is high and I have gold in a safe deposit box?
Take it to a local coin or bullion dealer, or offer it to an online dealer (which you can find easily with an Internet search). Expect to be paid spot price. If they dont offer spot price, take your business elsewhere. You can discover spot price online at , m, or many other websites.
How can I purchase gold that can be converted into ornaments?
You can buy gold bullion (bars, coins and rounds) that can be melted down.
We should not trust the fiat currency and highly consider bartering abroad. Boycotting goods is the only sensible way to restore power to the people and end monopolies. Communities should produce their own food supply, self-police and educate as they see fit. There isnt any product or material that we absolutely have to have that isnt within local reach. It is a shame to see the level of consumerism and government dependence overcome the desire for knowledge and skilled labor.
Does buying gold ETF vs. buying physical gold give similar returns?
Similar, but not identical. Owning an ETF entails certain administrative fees that cut into the owners profits. Precious-metals mutual funds and ETFs do provide various conveniences that many feel are worth the cost. Owning physical metal involves security and storage problems absent from ETF ownership.
Most banks do not. You can call any bank and simply ask. There are many local and online gold and silver dealers (coin dealers) who can help you.
Spot price is quoted per ounce rather than troy ounce.
See Part 2 ofBuy and Sell Gold Coins for Profit.
If you hold physical gold, take it to a local gold dealer (coin dealer) who can tell you exactly what you have.
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The commission rate on gold futures trading is negotiable.
The word carat refers to mass (weight), while karat describes purity.
If you store your gold at home, invest in a decent safe. Practice good safe hygiene. Bolt it to the floor out of sight of windows. Dont leave the combination on a Post-It note on the side of the safe. A reasonably large, fire-resistant safe will cost less than an ounce of gold (at recent prices) and can also be used to store important documents.
Dont pay too much for your gold. Historically the price for gold has usually been around $400 an ounce, adjusted for inflation, but during a bad economy or uncertainties it tends to go up, resulting in a bubble. As the economy improves, the price of gold will revert to its pre-bubble price range.
Since the price of gold tends to be dramatically cyclical, subject to many factors involving supply and demand, it can be quite difficult to valuate gold in an environment of constantly depreciating paper currencies. One way to valuate gold is to compare it to the price of stocks, which tends to be more stable. The Dow/gold ratio is the Dow Jones Industrial Average relative to golds price per ounce (or how many ounces of gold the Dow can buy). A high Dow/gold ratio means stocks are overpriced and gold is cheap, while a low Dow/gold ratio means gold is overpriced and stocks are cheap. One should consider buying stocks and selling gold when the Dow/gold ratio falls well below the historic trend-line (which has recently averaged about 20 or higher). Conversely, one might consider selling stocks and buying gold when the Dow/gold ratio is significantly above the historic trend-line.
Collecting gold antiquities can be profitable based on their historical value. However, this could involve issues of legality, including the need to seek permits. Black-market purchasing of such items is generally illegal, and most countries consider antiquities to belong to society at large rather than to a select few.
In the U.S. buying bullion is limited to weekday trading hours of 9 a.m. to 5 p.m. Eastern time.
The United States Mint website offers a database of coin dealers listed by state.
Keep an eye on U.S. Mint consumer alerts for scams and other shady dealings.
Never pay significantly more than market price for gold bullion. (Typically a premium of more than12 percent above spot price is too high.)
Make sure you can tell that thegold is realto avoid wasting your money.
Gold is expensive. Storing large amounts does bring certain security concerns with it.
Dont tell people youre investing in gold. Theres no sense notifying them that youre storing it in your house or somewhere equally vulnerable. Tell people only if they really need to know, such as a spouse or heirs to a will.
You will pay a premium for collectible coins. Think of the value of collectible coins as having two separate parts: the value of the metal and the value of the currency. There is no guarantee these two values will track with each other. If the value of a coin you are considering comes mostly from its utility as currency, consider whether you are trying to invest in gold or in collectibles.
As with any investment, be prepared for the possibility of losing money. The value of commodities such as gold will fluctuate over time, and seeing the value of your investment decrease can be quite troubling. Consult a financial advisor prior to investing in anything if youre unfamiliar with the methods and risks involved.
Gold does not appreciate or generate a return of its own accord (i.e. pay a dividend or otherwise generate income as a stock or bond can) other than through changes in the spot price. Holding gold is a good way to save for the future, but you need to practice good money management in all other respects, too.
To buy gold, start by deciding why youre buying gold. Consider how much money you have and the risks that you want to take. If you want to make a quick profit off of buying gold, purchase scrap gold from other people, and resell the items to pawn shops to make some money. If youre looking for a long-term investment, purchase gold bullion from a dealer, bank, or broker, and monitor the price over time to see when you should sell some of the gold.Read on for tips on investing in gold futures or buying gold exchange traded funds!
wikiHow is a wiki, similar to Wikipedia, which means that many of our articles are co-written by multiple authors. To create this article, 64 people, some anonymous, worked to edit and improve it over time. Together, they cited6 references. This article has also been viewed 752,030 times.
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