Last Updated: February 22nd, 2023
If you want to invest in gold, you have a few different options: you can buy bullion in the form of bars and ingots, or you can buy gold-backed ETFs or mutual funds.
However, it’s important to understand the risks and costs of owning gold before you make a decision and please remember that you don’t need to own a lot of gold to profit from it, so let’s try dipping our toes into some information before diving fully into the 2023 investment season.
Buying Bullion
While it may be tempting to buy ETFs or mutual funds, bullion is the most popular way to own the metal because it provides investors with the most direct exposure to the market.
Investors can purchase bullion bars and coins from private or government mints, other mints, precious metals dealers, and professional jewelers who may offer different prices, so investors should do their research and take the time to find a reputable dealer.
When buying bullion, it is important to pay full retail price of the product because you should never pay less than the spot price, or the cost of immediate delivery, for what you are buying. Look at this comparison to learn more. There are a lot of moving parts to buying bullion.
Another benefit of owning bullion is that it can help you diversify your portfolio. While stock and bond markets can fluctuate significantly, gold has been a stable commodity for thousands of years as it tends to perform well during financial calamities.
This can be a good way to diversify your portfolio, but it is important to consider your goals and risk tolerance before making any investment as most financial advisors recommend that you keep a maximum of about 10% of your assets in precious metals
In addition, bullion offers investors a layer of protection and security that paper currencies simply cannot provide. Over the long term, paper currencies are rapidly eroding in value.
Buying Gold-Backed ETFs or Mutual Funds
ETFs can be a great way to diversify your portfolios as they typically have lower fees than actively managed funds, and they are traded like stocks on an exchange. However, they can also be volatile during periods of market volatility.
You can buy these ETFs directly through your online brokerage account or with a stockbroker who may charge a commission on your transaction, but most will cost fewer than ten dollars.
One of the biggest benefits of owning an ETF is that it’s cheaper than purchasing bullion and that it also tends to perform better than the value of its physical counterpart over time, meaning you’ll earn a higher return from your investment.
Another benefit of owning an ETF is that you can diversify your portfolio. However, you can always invest in several types of different stocks and commodities, so you’ll reduce your overall risk.
Finally, ETFs can be a good way to hedge against inflation as these investments can be especially useful during times of recession or economic crisis, as their prices are generally less correlated with the stock market.
Buying Mining Stocks
Mining stocks are an excellent way to gain exposure to the price without physically owning the metal. However, if you’re considering buying these shares, be sure to take into account the risks and costs involved.
It is a hard metal that is typically found in placer deposits, such as sand, gravel and rock that have been mixed with water because miners then scoop up these materials and use a pan to separate the gold from the other material, which isn’t timely.
A miner’s share price will fluctuate based on many factors, including the company’s performance, its leadership and its ability to produce and refine gold, but the price of gold can also be influenced by geopolitical events and other economic issues.
The prices of gold can change quickly, and this can make it difficult to predict the direction in which they will move and, as a result, it’s important to monitor the performance of these shares closely over time.
Buying Through an IRA
Buying through an IRA is a popular investment strategy that enables savers to diversify their portfolios and protect their wealth from inflation, but what many don’t know is that it can also provide tax benefits if you have a high income.
First, the IRS requires that precious metals be kept at a depository institution (www.fincen.gov/frequently-asked-questions), not your home or in your safety deposit box which is important for security since you cannot take physical possession of your gold unless you have been approved by the custodian.
Second, there are a lot of costs associated with owning bullion which include storage fees, insurance, and cash-out costs if you want to sell your precious metals.
The IRS also requires that you meet certain qualifications to make a gold IRA deposit which typically include a minimum age of 59.5 and the ability to withdraw your funds without penalty.
Finally, a gold IRA is often more expensive than a traditional retirement account because you have to pay storage and insurance costs, as well as custodial fees for the account.
Buying Through a Mining Company
When investors want to own gold, they can purchase physical bars or coins, or invest in a gold-mining company which can help diversify their portfolios, especially if they have other assets that are prone to fluctuating prices.
Buying bullion is a popular option for investors because it offers the opportunity to buy gold at a premium price, often much higher than what you would pay for an exchange-traded fund (ETF) or mutual fund, but keep in mind that the cost of buying bullion can vary based on the amount you want to purchase, the metal’s purity and the weight of the bar or coin.
Bullion can be purchased through dealers and distributors, including U.S. Money Reserve, which sells a variety of gold bullion bars and coins which are stamped with the manufacturer’s name, purity, and weight, and are a valuable investment.
However, buying bullion comes with several risks which can include the expense of purchasing and storing the metal, as well as insurance coverage in the event of loss or theft, even if the amount surpasses over a million dollars.