Did you ever wonder “How to invest in gold”? You don’t have to now, it’s easy!

Gold investing might not bring the largest profit, but it is surely a very good way to diversify your investment portfolio. Also, it’s a simple and relatively safe way to secure your money for retirement or during the upcoming financial crisis.

In this guide, we’ll show you possible options on how to invest in gold with all their pros and cons.

Why Gold Investment Is a Good Idea?

When you think about investing in gold I bet you imagine big banking gold bars that are worth millions of dollars and you ask yourself:

Can I be a gold investor too?

Yes you can!

Those great 400-ounce (12.4kg) gold bars are not the only option to invest in gold. Well, in fact, you don’t even have to touch physical gold at all and invest in other options without the need of stocking gold bars and bullion coins.

But let’s get back to the main topic.

Why should you even consider investing in gold?

Here are some of the irrefutable pros of gold investment:

  • Good protection against inflation and deflation
  • Lower risk due to smaller fluctuations of gold price
  • Resources of gold are limited and cannot be extended significantly
  • Price of gold is not controlled by any national bank
  • It has a proven history of keeping it’s value

As you can see above, gold is a wise investment for either diversifying your portfolio. On the other hand, if you are not a professional investor and just want to protect your savings, gold gives you fair security and low risk.

So you know already why invest in gold. Now let’s look into investment options you have.

Gold Investment Options

Investing in gold gives you six different opportunities:

  1. Buying physical gold
  2. Internet Investment Gold
  3. Invest in gold-backed ETF’s
  4. Investing in gold derivatives
  5. Buying gold mining stocks
  6. Investing in gold allocated accounts

Their order is not a coincidence. We are starting from the most simple and safe methods of investing for beginners and moving to more advanced gold investment choices that require more investing knowledge.

Let’s dig into those options in detail.

Buying Phisical Gold

There is nothing unexpected here. You’re just buying gold bars and gold bullion coins.

It’s that simple!

Well, maybe not that simple, but it definitely the fastest and most simple way to get into gold investing.

Small, consumer gold bars and coins are considered 2/3 of all investment gold on the market and demand for it is constantly increasing.

The biggest advantage of buying physical gold bars and coins is for sure their accessibility. You can buy them both online and in brick and mortar stores. Both bars and coins come in different sizes so you don’t have to buy one large piece of gold at once.

Slight disadvantage is the need of storing the gold. Physical gold is as vulnerable for stealing as any object in your house, so you might think about keeping it in a safe or bank locker. Keep in mind that this makes your investment less profitable if you keep only a small amount of gold.

Physical Gold Pros:

  • Easy to buy and sell
  • Available in convenient sizes
  • Coins have a face value and can be used for payments
  • Small size, easy to store
  • Increasing demand for gold bars and coins

Physical Gold Cons:

  • Might require a safe or bank locker for safe storage

See Also:

Where To Buy Gold Coins

Internet Investment Gold (IIG)

Banks and some gold dealers offer their customers investing option called Internet Investment Gold (IIG). What is it?

IIGs are just bank accounts that allow customers to buy gold in grams or ounces. The difference between IIG and buying physical gold by yourself is that the bank or dealer buys the gold on the customer’s behalf and store it in secure place.

As you can see, buying Internet Investment Gold gives you the same options as physically buying gold bars and coins, but without the need to store it in your house or paying for a safe deposit vault.

Internet Investment Gold Pros:

  • Buying physical gold without a need for storage
  • All transactions are done online
  • Increasing demand for gold bars and coins
  • Easy to buy and sale

Internet Investment Gold Cons:

  • Smaller gain on investment due to bank/dealer involvement
  • A need to be online in order to make a transaction

Investing In Gold-Backed ETFs

Physically-backed gold exchange traded funds (ETFs) and other funds are close to 1/3 of investment gold on the market.

These are regulated financial products that has a corresponding value to a specific amount of gold. Most ETF’s are 100% backed by physical gold.

Although only authorized brokers can exchange shares for physical gold, some funds allow the exchange for personal investors but with high fees. ETFs can be purchased on a stock exchange and due to low spreads it usually closely matches a gold spot price.  

Gold-Backed ETFs Pros:

  • No need to storage of physical gold
  • High safety of the transaction
  • All transactions are done remotely
  • Easy to buy and sell

Gold-Backed ETFs Cons:

  • Transactions need to be done by an authorized broker
  • No access to the physical gold

Investing In Gold Derivatives

Investing in derivatives requires from investors a knowledge of financial securities and might be not suitable for gold investing beginners.

The biggest advantage of derivatives is that it allows investors to achieve much greater return on investment than other investment options listed. On the other hand it comes with greater chance of losses.

Derivatives are traded on margin or cash deposit that is paid to the broker. His cut is a small piece of the contract, but you have to keep this cost in mind while investing in gold derivatives.

Gold Derivatives Pros:

  • Allows to gain the best return-on-investment
  • All done by authorized stockbroker

Gold Derivatives Cons:

  • Need to pay broker premium
  • No access to physical gold
  • Greater potential for losses

Buying Gold Mining Stocks

Yet another way to invest in gold without physically owning one bar or coin.

Although buying gold mine stocks seems like a good idea at first, you as an investor must be aware that price of their stocks are not 100% correlated with price of gold.

Why?

Because running a mining company is more than just taking gold from under the ground. You have to keep in mind that these companies have operational costs and some of them never even finds gold deposits.

That’s why buying gold mining stocks give you about 3-1 leverage over the official gold spot price.

Our advice? Invest in larger companies with stable gold supply and ability to buy smaller miners.

Gold Mining Stocks Pros:

  • More profit to make with 3-1 leverage
  • No need to store any gold
  • Growing demand for gold makes new investments in this sector

Gold Mining Stocks Cons:

  • Higher risk, especially with stocks of smaller miners
  • The decreasing supply of gold makes it harder to find every year

Investing in gold allocated accounts

Last place on our list is dedicated to gold allocated accounts.

We’ll not spend more time explaining this method of investing as it is dedicated to bigger investors. On average bullion banks do not deal in quantities below 1,000 ounces, so this amount is usually out of reach for most individual investors.

Summary: How To Invest In Gold

Depending on how big is your investment and how experienced you are.

If you just beginning investing or you want to secure your savings against inflation we recommend you to buy either physical gold bars and coins or try Internet Investment Gold (IIG).

These options give you easy start for your investment, low risk and access to the gold.

If you are more experienced investor do not hesitate and go for ETFs, gold-backed derivatives or gold mining stocks. Greater money is there.

Those options will not only by nice diversification of your investment portfolio but might turn out to be very profitable in the future.