1. Purchase the physical stuff (e.g. gold bars, coins)
Gold is one of the most effective defensive assets for holding on to the value of your money. Since your dollars are going to fall in value, gold is arguably the best place to preserve value. The best forms for gold ownership are through minted coins: one-ounce South African Krugerrands, Canadian Maple Leafs, or American Eagles.
Advantage - It exists and can be personally traded.
Disadvantage - Storage and insurance costs can be high.
2. Purchase Futures/Commodity Contracts
Gold futures are hedging tools for commercial producers and users of gold. They also provide global gold price discovery and opportunities for portfolio diversification. In addition, they offer ongoing trading opportunities, since gold prices respond quickly to political and economic events, plus they serve as an alternative to investing in gold bullion, coins, and mining stocks.
Considering the range of ways to get into the gold market, futures trading is the most complex and while big fortunes could be made, they can also be lost in an instant.
Advantage - Great Liquidity.
Disadvantage - Leverage risks, complexity and cost.
3. Invest in Mining Stocks
The perceived advantage of investing in gold mining shares is that their value is usually more sensitive to the price of gold than even a gold bar. This is because gold mining shares are valued on the basis of their anticipated profits through the life of the mine, and these depend on the reserves, and on the relationship between gold mining production costs and the anticipated value of the gold extracted.
Advantage - Can benefit from company success as well as gold price.
Disavantage - Gold price can go up while company fails. 4. Exchange Traded Funds (ETF's)
Exchange traded funds (ETFs) present an even more interesting way to invest in gold. An ETF is a type of mutual fund that trades on a stock exchange like an ordinary stock. The ETF's exact portfolio is fixed in advance and does not change. Thus, the two gold ETFs that trade in the United States both hold gold bullion as their one and only asset.
Advantage - Less expensive than holding the metal.
Disadvantage - Subject to stockmarket performance not just gold price.
Are You Ready to Start Investing in Gold?
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