Investing in Gold
Investing in gold can be done in a several different ways.
Buying Physical Gold
You can buy gold directly in form of gold bars
, gold coins
. If you buy gold bullion
or gold coins you will be taking physical possession of the gold and you will have to pay for storage and insurance yourself. Buying physical gold
has always been a popular way of investing in gold. By owning gold directly the investors have the assurance that its value will never go to zero, as it may happen to fiat currencies, stocks and other financial instruments.
Buying Gold Certificates
Buying gold certificates is indirect way of owning gold. When investors buy gold certificates they hold a certificate, instead of buying gold coins or gold bars directly. Owning gold certificates allow investors to easily trade gold, without dealing with physical gold. However many gold investors prefer to actually own gold versus owning a piece of paper saying that they own gold.
Some banks offer Gold Accounts, through which you can buy, sell and hold gold. The gold accounts are generally two types – allocated and unallocated.
With the allocated gold account the gold that the investor buys is stored in a secured vault, and specific gold bars or gold coins are allocated for each investor. The investor has a full ownership of the allocated gold and the vault owner doesn’t have the right to lease, lend or trade this gold. With the allocated accounts the investor pays for the gold storage and insurance.
With the unallocated gold accounts, the investor doesn’t have any specific gold bars or coins allocated, and the vault owner (bullion bank or dealer) has the right to lease the gold. The advantage of the unallocated accounts is that there are no insurance and storage costs.
Gold Pool Accounts are for small investors who intend to hold less than 1000 ounces of gold. When investing in Gold Pool Account you can own as little as 1 troy ounce of gold.
Gold Exchange-Traded Funds
With Gold Exchange-Traded Funds
(Gold ETF) you can trade gold as any other security on major stock exchanges in Australia, Switzerland, UK, USA and other countries. The Gold Exchange-Traded Funds are backed by physical gold held in vaults, and are very convenient way to invest in gold without taking physical position.
Gold Futures and Gold Options
are contracts to make or take delivery of a specified amount of gold of certain purity on a prearranged date at fixed price. Gold futures offer a great leverage, but they are very risky as well.
give the right to their owner to buy or sell gold of specific amount, on a prearranged date at fixed price. As their name imply the gold options give the investor the right to buy or sell, but they do not obligate him to do so. Gold options also offer lots of leverage to investors.
Gold Mining Shares
Buying Gold Mining Shares
is another popular way to invest in gold. Investing in gold mining shares gives you great leverage, but it also involves higher amounts of risk compared to directly owning gold. When the price of gold rises, the profit made by gold mining companies usually rises much faster, but the same is true when the price of gold goes down – the profit margins of gold mining companies shrink much faster than the decline of the gold price.
Gold Mutual Funds
Many banks and financial institutions offer gold oriented mutual funds
, which invest in shares of gold mining companies.
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