How to Invest in Gold: A Comprehensive Handbook in 2023

Gold has always been a popular investment option throughout history, serving as a safeguard against various uncertainties like inflation, economic instability, currency fluctuations, and even times of conflict.

When considering gold as an investment, it's important not to limit yourself to acquiring physical gold through coins or bullion.

There are alternative ways to invest in gold, such as buying shares of gold mining companies or investing in gold exchange-traded funds (ETFs). Furthermore, trading options and futures contracts present opportunities for investing in gold.

These diverse choices give investors flexibility and the chance to benefit from the potential advantages of including gold in their portfolios.

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How to Invest in Physical Gold

For investors who are used to trading stocks and bonds online, investing in physical gold can pose some challenges. Unlike traditional brokerages, dealing with physical gold often involves interacting with dealers outside of the usual platforms.

Additionally, there are additional costs involved such as storage fees and the need to obtain insurance for your investment. When it comes to investing in physical gold, you have three main options: bullion, coins, and jewelry.

Gold Bullion

When the majority of individuals consider investing in gold, they typically envision bullion - large, glistening gold bars securely stored in a vault.

Gold bullion is available in various sizes, ranging from a few grams to 400 ounces. However, it’s most commonly found in one-ounce and ten-ounce bars. Currently, the price of gold stands at approximately $1,900 per ounce (as of September 2020), making investment in gold bullion quite expensive. Unlike stocks, it’s not possible to acquire fractional shares of a gold bar.

Given the high cost associated with gold bullion, it’s essential to engage with a reputable dealer and ensure payment for delivery, preferably with insurance or opt for storage at a spacious vault or within a secure deposit box.

If you decide to invest in gold through bullion purchases, staying updated on the current price of gold would be advisable. This will enable you to make informed decisions regarding when to buy since most dealers adjust their prices based on prevailing spot prices.

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Gold Coins

The weight of the most commonly found gold coins is usually one or two ounces, although there are also options available in half-ounce and quarter-ounce denominations. The gold coins that are most well-known and sought after by collectors include the South African Krugerrands, Canadian Maple Leafs, and American Gold Eagles. Some dealers even offer damaged or worn coins as well as blank ones.

However, it's important to note that the prices of gold coins may not solely be determined by their actual gold content. Collectible coins that are in high demand often have a higher price due to their rarity or historical significance.

For instance, a one-ounce American Gold Eagle coin was priced at just over $2,000 in mid-September 2020. This represents an approximately 5% increase compared to the value of an equivalent amount of pure gold bullion.

While it may be possible to find better deals on gold coins from local collectors or pawn shops, it’s generally considered safer to make purchases through reputable licensed dealers instead.

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Gold Jewelry

If you prefer, there’s also the option to purchase gold in the form of jewelry. This could include either new pieces or ones that have been previously worn but are now damaged. However, it’s important to note that investing in gold jewelry comes with certain risks that do not apply when investing in pure gold.

First and foremost, one must exercise caution when purchasing second hand jewelry because not all sellers are reputable dealers. The authenticity of the piece matters not only to you as the buyer but also to anyone you may potentially sell it to later on. It’s crucial to buy investment-worthy jewelry from a reputable dealer and obtain as much documentation as possible.

Secondly, keep in mind that the price of jewelry will include a markup based on factors such as its design and manufacturing company. This markup could range anywhere from 20% up to more than three times the value of the actual raw precious metal content.

Additionally, it’s essential for buyers to be aware of their purchased jewelry's purity or gold percentage. Gold purity is measured using karats, with 24 karats representing 100% pure gold. Lower purity levels result in a decrease in melt value, referring to how much your piece would weigh if melted down into pure gold. Due to other components present within your piece besides just the gold itself.

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Gold IRA

A Gold IRA is a choice for investment that permits individuals to broaden their retirement portfolio by possessing physical gold and other valuable metals within an account that offers tax advantages.

This option acts as a safeguard against uncertain economic conditions and inflation because of the historical reputation of gold as a safe-haven asset. While it provides diversification and security, investors must carefully evaluate fees, reliable custodians, and long-term performance when comparing it to other assets before deciding on a Gold IRA.

How to Invest in Gold by Purchasing Stock in Gold Miners

Investing in the stocks of gold mining, refining, and trading companies offers a simpler alternative to buying physical gold. Instead of directly purchasing gold, you can invest in the shares of these companies through your brokerage account.

Some of the most popular stocks in this sector include:

Newmont Corp. (NEM): Colorado is where the headquarters of Newmont, the biggest gold mining company globally, are located. They have mining operations in North and South America, as well as Africa.
Barrick Gold Corp. (GOLD): Based in Toronto, this global leader in gold mining operates in 13 different countries across the globe.
Franco-Nevada Corp. (FNV): Instead of owning any gold mines, Franco-Nevada acquires royalty rights from other gold miners.

Please keep in mind that while the performance of gold company stocks is linked to gold prices, it’s also influenced by the financial health and operational aspects of each specific company.

Consequently, investing in individual gold companies entails comparable risks as investing in other stocks. Single stocks can be subject to fluctuations and do not offer the same level of security as diversified funds.

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Invest in Gold ETFs and Gold Mutual Funds

Investing in gold ETFs and mutual funds provides the opportunity to benefit from the long-term stability of gold, while also offering greater liquidity than physical gold and more diversification than individual stocks in the gold sector. There’s a variety of different types of gold funds available. Some are passive index funds that track industry trends or the price of bullion using futures or options.

For instance, the GLD ETF (SPDR Gold Shares) holds both physical gold and deposit receipts, with its price moving in sync with the price of actual bullion. On the other hand, GDX (VanEck Vectors Gold Miners ETF) is a passively managed fund that follows a portfolio made up of stocks from companies involved in gold mining and refining.

Professional investors such as Franklin Templeton's Gold and Precious Metals Fund actively manage their gold mutual funds. These funds strive to surpass returns achieved by passively managed index funds; however, they come with relatively higher expense ratios as compensation for their active management approach.

It’s important to keep in mind that when investing in gold stocks, you’re not actually purchasing physical gold. Instead, you’re acquiring paper assets that are theoretically supported by the debt or equity of mining companies or futures and options contracts for physical bullion.

As a result, the value of gold mutual funds and ETFs may not directly align with the market price of gold, and their performance may differ from that of physical gold.

Top 3 Companies to Invest in Gold With

Goldco – Best Gold IRA Company Overall

Thinking about how to invest in gold? Goldco is a Gold IRA company based in California that is privately owned and has been operating in the precious metals industry for more than ten years. They specialize in offering gold IRA and asset protection services.

Goldco assists clients with starting or transferring their existing IRAs to gold IRAs, as well as providing support for tax-advantaged retirement plans.

It's important to note that while Goldco does not impose any fees of its own, there are associated fees charged by custodians, along with setup and annual maintenance fees, as well as storage fees ranging from $150 to $200 annually.

To open a gold IRA account, a minimum initial investment of $25,000 is required, and customers must complete the process with the help of a representative.

The numerous positive customer reviews give an overall rating of 4.8 out of 5 stars for Goldco's exceptional communication skills, efficiency in their operations, specialist knowledge about precious metals investments, and excellent customer service provided to clients.

However, it should be noted that the company has made efforts to address complaints related to high markups on products sold by them, misleading information being provided during transactions, and delayed payouts experienced by some customers.

For any inquiries or assistance required from Goldco's support team, they can be contacted via phone or through their website chatbot during weekdays from Monday through Friday between 7 a.m. - 4 p.m. Pacific Standard Time (PST).

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American Hartford Gold - Best Gold IRA Company for Small Investments

A Precious Metals IRA , also known as a Gold IRA, is a retirement account that allows individuals to invest in physical gold and other valuable metals.

Unlike traditional IRAs that focus on stocks and bonds, a Gold IRA offers the advantage of diversification and protection against inflation and market uncertainties. By working with a specialized custodian, investors can securely store their gold and make direct purchases or transfer funds from an existing IRA.

While a Gold IRA can provide long-term stability for retirement savings, it's important to be aware of the risks involved. These include price fluctuations in the precious metals market, storage costs associated with holding physical assets, and potential liquidity issues when selling gold.

Conducting thorough research and seeking professional advice are crucial steps in determining whether a Gold IRA aligns with one's investment goals and risk tolerance level.

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Augusta Precious Metals - Best Gold IRA Company for Customer Support

Thinking about the best ways to invest in gold? Augusta Precious Metals comes in handy. It was established in 2012 under the leadership of CEO Isaac Nuriani and provides IRA investors with a selection of silver and gold coins and bars.

The company ensures that its metals are of exceptional quality, with a purity level of 99%, excluding the American Gold Eagle coin.

The pricing structure can be accessed online and is determined by adding a margin to the base price, which may vary depending on factors such as supply, demand, and economic conditions. Augusta actively encourages potential investors to compare their prices with those offered by other dealers.

Additionally, they provide new investors with a seven-day grace period during which they can reverse transactions if necessary.

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Use Futures and Options to Invest in Gold

One of the riskiest methods of investing in gold is trading futures or options contracts, which falls under speculative investing. Futures and options are classified as derivatives since their value is solely based on the price of an underlying asset.

A futures contract involves an agreement to buy or sell a security at a predetermined price on a specific date, regardless of prevailing market conditions. On the other hand, an options contract grants you the choice to buy or sell a security if it reaches a particular price on or before an agreed-upon date.

To invest in futures or options, it’s necessary to have an account with an online broker that offers these investment vehicles. While numerous online brokerages allow trading in these securities, they may require account holders to complete additional forms acknowledging the risks associated with investing in such derivatives.

After setting up a brokerage account for options or futures trading, you have the ability to directly buy and sell them through the platform. The platforms typically charge a commission for these types of trades, which can vary based on the number of contracts involved.

Investors who opt to invest in gold through options or futures contracts must actively monitor their holdings in order to make timely decisions such as selling, rolling over, or exercising their options before they become worthless.

It’s important to note that each option comes with a certain level of leverage by default, meaning that if investors misuse them and face market losses, those losses can quickly accumulate.

Should You Invest in Gold?

Are you curious about how to Invest in Gold? Investing in gold can provide a safe haven for those concerned about inflation and other potential disasters. While gold can be as volatile as stocks in the short term, it has proven to hold its value consistently over long periods of time.

There are various options available for investing in gold, depending on your risk tolerance and preferences. These include physical gold, gold stocks, gold ETFs, and mutual funds, as well as speculative futures and options contracts. Experts generally advise allocating no more than 10% of your portfolio to any form of gold investment.

It’s important to note that all forms of investing come with their own set of risks, and this holds true for investing in gold as well. However, the unique nature of the gold market requires a significant amount of time to fully understand.

For investors looking to add some stability and shine to their portfolios through exposure to gold, choosing safer options like Gold ETFs or mutual funds would be recommended.

How to Invest in Gold? – FAQs

What Is the Highest Price of Gold in History?

In the past, Gold attained its highest point ever in August 2020, reaching a peak of 2074.88. The information regarding Gold's data, predictions, and historical chart was most recently revised in July 2023.

How Do I Start Investing in Gold?

One of the most popular methods of investing in physical gold is by buying gold bullion. Gold bullion refers to high-quality investment-grade gold, typically in the form of bars, ingots, or coins. Investment-grade gold always has a purity level of at least 99.5 percent: Gold bars are stamped with the manufacturer's name, weight, and purity information.

Bottom Line – How to Invest in Gold

Investing in gold is not for everyone, as some investors prefer to focus on businesses that generate steady cash flow rather than relying on the fluctuating value of gold. This is why renowned investors like Warren Buffett advice against investing in gold and instead recommend investing in businesses that generate consistent cash flow. Additionally, owning stocks or funds offers simplicity and high liquidity, allowing for easy conversion to cash if necessary.

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