How to invest in gold — 5 ways to buy gold bars and invest in it
Investing in gold can increase your net worth and move you closer to your long-term financial goals. This physical asset attracts many investors due to its intrinsic value and lack of correlation with the stock market. Gold thrives during economic uncertainty and can gain value while the stock market drops.
While you probably guessed that you can buy and store physical gold, you never have to see or touch gold to profit from it. Investors have several choices if they want to accumulate gold. Even if you’re new to investing, you can use one of the top automated investing platforms to buy gold.
How to invest in gold
You can buy physical gold and store it or explore other avenues to invest in gold. Let’s review some of the ways you can buy gold.
1. Buy physical gold
2. Invest in gold stocks
3. Invest in gold ETFs
4. Invest in gold mutual funds
5. Invest in gold futures
1. Buy physical gold
Buying physical gold is the only way to gain full ownership of gold is to buy. While other methods of buying gold involve a firm holding onto the gold for you, purchasing physical gold gives you more control.
Investors can choose from several types of physical gold. Gold coins, bars, bullion, and jewelry are some of the physical gold investments that are available. You can buy physical gold as part of a self-directed IRA or opt to purchase gold without a retirement account.
Interested in adding gold to your retirement account? Don’t miss our Goldco Review.
Who invests in physical gold?
Physical gold is optimal for long-term investors who want a hedge against economic uncertainty and stock market corrections. The asset performs well during inflation, which will help people who are concerned about that metric.
A key distinction between physical gold and other options is that buying and selling this asset takes longer. It’s less liquid, which doesn’t bode well for traders. You’ll also need space to store the gold.
While you can store gold in your house, it’s also popular to use a bank safe deposit box for additional security. You may have to make that additional investment if you want to buy physical gold.
Risks of investing in physical gold
The two main risks of investing in physical gold are theft and less liquidity. Theft becomes a bigger problem if you store gold in your house rather than putting it in a bank safe deposit box. It can also take a few days to find a buyer for your physical gold if you want to sell it.
Owning physical gold can also reduce your profits since you’ll have to pay for storage. While firms pass these costs onto their investors, their economies of scale allow them to minimize the storage costs per ounce.
Pros and cons of investing in gold futures
Pros
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Gold futures can result in substantial returns
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Leveraged investing gives you more exposure to gold
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Lock in a price for gold
Cons
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High volatility
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Futures can result in significant losses
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Not every brokerage firm offers futures trading
Where can you buy physical gold (Gold Bullion)?
Investors can buy physical gold from online gold exchanges, local gold sellers, and banks. It’s important to check the gold’s purity, authenticity, and weight before investing. You’ll have to protect gold on your own, typically with a bank-safe deposit box.
If you do business with an online gold seller, make sure the company is properly licensed. You can check online reviews and the company’s Better Business Bureau rating to gauge its legitimacy.
The leading gold and silver specialist makes it easy to buy physical precious metals. AHG’s featured products for its gold IRAs are the Gold American Eagle, Silver American Eagle, Gold Canadian Buffalo, and Silver Canadian Buffalo. Investors planning for retirement can set up Gold IRAs with AHG.
You can take advantage of the long-term market potential of this precious metal by starting a Precious Metals IRA with help from Thor Metals. Enabling investors to include gold or silver in their portfolio, a Precious Metals IRA can be a secure and stable investment option, enhancing diversification and safeguarding your cash value against economic uncertainties.
2. Invest in gold stocks
Many companies turn to the stock market to raise capital, including companies that depend on gold for their businesses. Some gold miners, precious metal streaming companies, and gold royalty companies have their shares available in the public markets.
While these stocks are partially tied to gold, their financial performances also play a role in total returns. For instance, a gold mining stock can outperform gold if it gains more market share and acquires new mines at a good price. However, another gold mining stock can underperform the precious metal if the corporation is deep in debt and is losing sales.
Gold stocks are also more correlated to the stock market than physical gold, but they are still not as correlated to the S&P 500 as most equities.
Who invests in gold stocks?
Investors who want to buy gold without worrying about storage or liquidity may want to consider gold stocks. Buying gold stocks also gives investors the potential to outperform the precious metal’s total returns if the underlying company performs well. Furthermore, some gold stocks offer consistent dividends.
Risks of investing in gold stocks
Gold stocks can underperform gold if the underlying company loses market share or has a bad balance sheet. You aren’t only buying gold when you invest in a gold stock. You also have to consider the corporation’s financial strength, which adds complexity to the investment.
Pros and cons of investing in gold stocks
Pros
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High liquidity
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You don’t have to worry about storage
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Some gold stocks offer quarterly dividend payments
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Diversify your portfolio within a few minutes
Cons
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Gold stocks are subject to stock price fluctuations
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Some gold stocks underperform the precious metal due to bad financials
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It takes more time to analyze gold stocks than physical gold
Where can you buy gold stocks?
Various brokerage firms make it easy to buy and sell gold stocks. Market orders allow you to purchase a stock at its current price, while limit orders only go through when the stock reaches your designated price point.
Public.com is an online investment platform offering stocks, ETFs, crypto, and alternative assets like fine art and collectibles—all in one place and with very low fees. The company continues to innovate and add new investment features, making it a one-stop-shop for many investors. Follow along with our Public.com review to learn more about Public’s pricing, supported investments and much more.
Examples of gold stocks
Investors can choose from several gold stocks with varying performances. These are some of the gold stocks that are available:
- Barrick Gold: The Canadian-based company has 16 operating sites in 13 countries.
- Newmont: The gold mining company is based in Colorado and has a 1.80% yield.
- Agnico Eagle Mines: The Canadian-based gold producer has a dividend yield of close to 2%.
- Kinross Gold: The Canadian-based gold and silver mining company has been around since 1993.
- Eldorado Gold: The company operates gold mines in Turkey, Greece, and Canada.
3. Invest in gold ETFs
Gold ETFs give investors instant exposure to several gold stocks. You don’t have to worry about whether Barrick Gold will outperform Newmont or if Kinross Gold will underperform the market.
Gold ETFs hold numerous stocks that profit from the rising demand for gold, such as gold mining companies. Investors who want to invest in gold ETFs can visit a brokerage’s website to compare gold ETFs and their holdings. Morningstar is a great resource for comparing ETFs.
Who invests in gold ETFs?
Investors who like the benefits of buying individual gold stocks over physical gold but don’t want too much complexity may gravitate toward gold ETFs. They offer the same advantages as buying gold stocks, but you don’t have to spend as much time analyzing individual companies. Gold ETFs are less risky than buying individual gold stocks and also save time.
Risks of investing in gold ETFs
Gold ETFs can underperform gold if the companies in the fund don’t perform well. Even if the companies deliver solid gains, you will have to pay annual fees expressed as the expense ratio. These fees get deducted from your position’s value, so you never see this fee directly. Furthermore, if you don’t like some of the holdings in a gold ETF, there isn’t much you can do about it.
Pros and cons of investing in gold ETFs
Pros
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Gold ETFs offer instant portfolio diversification
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These ETFs reduce risk
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Buying gold ETFs doesn’t require as much time or research as buying individual gold stocks
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Gold ETFs are highly liquid and trade throughout the market day
Cons
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The expense ratio reduces your total returns
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You have no influence over the fund’s holdings
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Gold ETFs offer indirect exposure to gold through various companies instead of direct exposure to the precious metal
How to buy gold ETFs?
Investors can buy gold ETFs at various brokerage firms. The companies that let you buy and sell individual gold stocks will also let you obtain gold ETFs. However, not all brokerage firms offer their own gold ETFs. You may have to use your preferred brokerage firm to buy a gold ETF that’s offered by another institution.
Robinhood makes it easy to buy gold ETFs and other investments like stocks and crypto. You can create a free account and start building your portfolio today.
Examples of gold ETFs
Investors can choose from several gold ETFs for exposure to the precious metal. These are some of the available options:
- SPDR Gold Trust (GLD): This fund has a 0.40% expense ratio and $73.3 billion in total assets. It offers direct exposure to gold without any of the mining stocks or other corporations. It has an annualized return of 11.1% over the past five years.
- Sprott Gold Miners ETF (SGDM): This ETF has 35 holdings, with the top 10 holdings making up 66% of total assets. SGDM has a 0.50% expense ratio and an annualized 6.3% return over the past five years.
- VanEck Junior Gold Miners ETF (GDXJ): This fund has a 0.52% expense ratio and $5.6 billion in total assets. Its top three holdings are Kinross Gold, Alamos Gold, and Harmony Gold Mining. It has 88 equity holdings and an annualized return of 5.9% over the past five years.
4. Invest in gold mutual funds
Gold mutual funds are very similar to ETFs. These funds give investors direct exposure to gold or offer a portfolio of gold-oriented corporations. Gold mutual funds have expense ratios, just like ETFs. The main difference is that gold mutual funds only trade once at the end of the market day, while gold ETFs trade throughout the market day.
Who invests in gold mutual funds?
Gold mutual funds cater to the same investors who want to buy gold ETFs. However, gold mutual fund investors prefer to buy and hold for the long run. They don’t want to entertain selling their shares in the middle of the day.
Risks of investing in gold mutual funds
Gold mutual funds have the same risks as gold ETFs but with one additional risk. If gold prices collapse when the market is open, you’re stuck with your gold mutual fund until the end of the market day. Gold ETFs give you the flexibility to exit your positions when necessary, and it’s almost always a better idea to have gold ETFs instead of buying gold mutual funds.
Where can you buy gold mutual funds?
Gold mutual funds are available at the same brokerage firms that let you buy individual gold stocks and ETFs. You must enter the ticker and wait for your order to go through. Gold mutual fund buy and sell orders get processed after the stock market closes for the day.
Examples of gold mutual funds
Investors can choose from several gold mutual funds that resemble gold ETFs. These are some of the highlights:
- Fidelity Select Gold Portfolio (FSAGX): The fund has $1.5 billion in total assets and a 0.70% expense ratio. It has an annualized 5.8% return over the past five years.
- First Eagle Gold A (SGGDX): The fund has $2.8 billion in assets and a 1.19% expense ratio. It has an annualized 10.4% return over the past five years.
- Allspring Precious Metals A (EKWAX): The fund has $371.8 million in assets and a 1.09% expense ratio. It has an annualized 9.0% return over the past five years.
5. Invest in gold futures
Gold futures are contracts where a buyer and seller agree to exchange gold at an agreed-upon price. They’re more complex than the other methods covered and are primarily for traders and gold companies.
Each gold futures contract requires 100 ounces of gold to exchange hands at the designated date. Futures involve plenty of leverage and can result in significant losses for traders who incorrectly guess how the price of gold will change.
If you’re new to futures trading, we’ve got you covered with this introduction to trading futures.
Who invests in gold futures?
Gold futures are only suitable for traders with high risk tolerances. Gold futures offer leveraged exposure to gold. You can make a lot of money with gold futures, but you can also endure significant losses. For most investors, it’s not worth investing in gold futures.
Risks of investing in gold futures
Gold futures involve considerable leverage, exposing you to meaningful losses if gold doesn’t move in your favor. Sharp price fluctuations are normal, as any economic or political event can have a major impact on the contract’s value.
Pros and cons of investing in gold futures
Pros
-
Gold futures can result in substantial returns
-
Leveraged investing gives you more exposure to gold
-
Lock in a price for gold
Cons
-
High volatility
-
Futures can result in significant losses
-
Not every brokerage firm offers futures trading
Where can you buy gold futures?
Some of the brokerage firms that offer individual gold stocks, ETFs, and mutual funds also support gold futures trading. However, you’ll have to dig a bit deeper to find these brokerage firms. Many institutions offer every type of trading except futures trading.
Examples of gold futures
Investors can choose from several types of gold futures. For instance, some futures let you buy 100 troy ounces at a specified price upon the expiration date. Gold futures, E-mini gold futures, and micro e-mini gold futures are some of the most popular choices available.
Tips for investing in gold
There are a few tips you should know before investing in gold. These are the highlights:
- Decide your risk tolerance: Investing in gold futures can be risky, while ETFs can help spread out your risk.
- Do your research: If you decide to invest in a specific gold mining company, look into its performance over the last few years and whether it mines for other metals or resources.
- Start slow: Most people who invest in gold make it a small part of a diversified portfolio. Consider a wide range of investments.
- Ask for help: Don’t be shy to ask your financial advisor for input on whether gold would be a good addition to your portfolio.
Is gold a good investment?
Gold is a good investment for individuals who want a reliable hedge against inflation. Furthermore, gold can gain value while other assets, such as stocks and real estate, enter corrections.
This precious metal probably won’t outperform growth stocks during bullish economic cycles. Gold caters to conservative investors who want some safeguards from economic uncertainty. Gold has been used for thousands of years and holds intrinsic value.
Is gold recession-proof?
Gold tends to outperform most assets during a recession. Its status as a high-value commodity gives it more resistance to economic downturns than other assets.
Investors saw gold outperform stocks during the Great Recession, when gold increased by 8.29% in 2008. Meanwhile, the S&P 500 lost 38.49% of its value in the same year. Gold offers more certainty than fiat currencies, which are subject to constant inflation.
FAQs
Marc Guberti is a certified personal finance counselor and a freelance writer who resides in Scarsdale, New York. His work has been featured in US News & World Report, Newsweek, InvestorPlace, and other publications.
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