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If this were an infomercial, or a sales pitch, we might start this feature by writing, “So, you’ve decided to invest in gold?”. We’re not trying to sell you anything here, though – just hoping to provide investors with the best gold-related information that there is so that they can make the best purchasing and investment decisions possible. There is no shortage of outlets to pursue in terms of investing in gold. In this day and age, given the fast-moving nature of the globalized and digital investment community, there are constant developments and new products coming to light that either alter or add to the wide range of gold investment options available to investors. From online investing, to in person trading, to purchasing tangible gold directly, you can pretty much invest in gold in any way that you’d like – the question is, which way is best? Or perhaps more accurately, which gold investment avenue is best suited to fit your needs? In this feature we will detail the very best in gold investment options in 2016, as well as describe how to use them. Hopefully, after gaining a sense of the kinds of directions that can be taken in terms of gold buying and investing, the option that best serves you and your needs will be clear. Without further ado…
Investing in ETF’s – Exchange-Traded Funds
Exchange-traded funds are investment funds available to be bought and sold on stock exchanges. ETF’s buy and hold specific assets, or commodities, and give investors the opportunity to invest in the fortunes of specific assets or commodities by investing in the fund. ETF’s hold only these specific assets, and as such their price movement is dictated solely by the price movement of the assets that they hold.
What all of this means is, by investing in a gold ETF, you are essentially investing in gold – you will either lose or gain on your investment based on the performance of gold – just like you would if you owned physical gold. The advantage to investing in a gold ETF is that they feature liquidity and convenience in terms of trading – it’s a lot easier to log onto Scottrade and make a trade than it is to bring your gold to the pawn shop, or to send it to a gold dealer for appraisal. The disadvantage is that the ownership of gold is not free – you will have to pay fees on your trades as dictated by your stock trading platform. Additionally, it’s always nice to be able to see and hold your investment, if only because there’s always a greater than zero-percent risk of being defrauded by the fund.
Investing in Physical Gold
As we touched on in our “Why to Invest in Gold 2016” feature, back in the day and throughout the annals of history, gold has been used as a global, universally recognized currency. In today’s world this is no longer the case – physical gold can’t be used to purchase goods and services, it needs to be sold or traded for currency first. However, this hasn’t stopped folks all over the world from owning physical gold in various forms – coins, bars, jewelry, etc. A popular way of investing in physical, tangible gold is through the purchasing of gold bullion – bullion meaning a quantity of precious metals, measured by weight.
Gold bullion can be purchased in person at various gold outlets or, more commonly, ordered online through gold trading platforms. Owning your own gold is not without both pros and cons – it’s always nice to be able to physically hold your investments, but there is an inherent risk in keeping valuables such as gold in your home (as a result of this, many people store their gold in safety deposit boxes). Just like investing in a gold mutual fund, the value of your physical gold will fluctuate with the price of gold itself. Remember that selling physical gold will likely require more effort than other gold-investment options – the gold will either need to be sold in person, or mailed to the seller who must then verify its authenticity.
Owning Stock in Gold Companies
Not all gold and mining companies are created equal. Some companies have been more successful in mining gold than others, or have more valuable reserves, or more promise based on their ownership of untapped mines and land. Investing in gold and mining companies is definitely an investment in gold – the price movement of gold will largely influence the movement of the company stock – but it also represents an investment in the company itself, and its ability to mine gold and, potentially, other metals.
Senior gold stocks are older, well-established gold companies that feature track records of sustained success. Investing in senior gold stocks is a move towards diversity and safety – there is not much risk or big potential in investing in these companies, whose investment potential is generally tied to the success or shortcomings of gold itself. Junior gold stocks, on the other hand, are more of a speculative play. Junior gold stocks are normally newer companies that do not have access to reputable mines, and instead try to access high-risk, high-potential mines. Therefore, an investor might hit it big with a junior gold stock, or the opposite could happen and the company will crash due to unfounded speculation and potential. Like ETF’s, gold company stocks are an easy and convenient way to invest in gold itself, but do have required fees for trading. For investors who are looking for more boom-or-bust gold investments, and who have high risk-tolerance, look to junior gold stocks. If you’d simply like to invest in gold via a reputable mining company, go for senior gold stocks.
Investing in Gold Options or Futures
For the more experienced investor, options and futures are an exciting way to procure gold investments. Both options and futures do feature an ‘all-or-nothing’ element to them, however. Call options, essentially, give you the right, when purchased, to buy gold for a specific price – the strike price – within a certain period of time. If gold rises above the strike price within your window of time, you’ve made money, while if it falls below, you’ve lost the cost of the option (the ‘premium’). Put options work the same way as call options, but in reverse. In other words, when purchased, put options give the investor the right to sell gold for a specific price within a certain period of time. Therefore, if gold falls below the strike price, you profit, whereas if the gold rises above the strike price, the investor loses the premium.
Gold futures are contracts by which the investor agrees to purchase a certain amount of gold in the future at a predetermined price. If gold rises above that predetermined price, the investor prospers, whereas the investor loses out if gold falls below this price. Options and futures represent another two ways to invest in the strict price movement of gold, albeit they are both riskier than your typical gold investments. Both options and futures are only recommended for experienced investors who have traded in futures and options before and understand the risks that they are undertaking.
Investing in Goldmoney (BitGold)
Let’s do a brief review, shall we? Out of all of the gold investment options we have reviewed thus far, we have identified certain pros and cons, or benefits and shortcomings, of investing in gold in different ways. We recognize now that investing in physical gold is helpful in that people like to physically hold their investments, or at least have that option available to them. More so, investors appreciate the ease and convenience of online trading. However, no one likes trading fees, and no one wants to feel like there’s a possibility that their investment could be fictitious or unredeemable. Gold in general is limiting as well – the process of converting gold into currency if and when you’d like to is a necessary one for the purposes of ‘spending’ gold. All of this kind of makes gold sound like more trouble than it’s worth, wouldn’t you say? Well, what if we told you there was an outlet for gold ownership and investment that featured all of these listed benefits, but none of the cons? Such an outlet is very much a reality – and it’s called Goldmoney (formerly known as BitGold).
A Canadian payment services company, Goldmoney offers its users the revolutionary ability to buy, save, and spend with physical gold. After purchasing gold through Goldmoney, users can sit on their gold as an investment, or spend the gold as one would a currency through their digital wallet for online purchasing, or via a physical debit or credit card. Rather than acting as actual currency, which could fall victim to inflation or other economic factors, Goldmoney spending power is reflected in the value of gold – users are investing in gold, but with the ability to spend their gold, or investment, at any time. Making payments using Goldmoney is free (there is a 1% of value fee when selling gold), and Goldmoney is accepted globally – users can spend their gold on anything from a cup of coffee to a major purchase. The gold owned by users is stored in private vaults and redeemable at any time, meaning that unlike when owning a gold stock or ETF, investors and purchasers can in fact receive their gold in physical form whenever they’d like. Goldmoney represents the modern paradigm for gold ownership – users get all of the pros in owning gold, and none of the cons.
— Goldmoney (@Goldmoney) September 4, 2016
Ready to go out and buy as much gold as you can possibly afford? Great! But seriously, this guide is only intended to serve as a general overview of the gold purchasing and investment options available to people today. The truth is that every person’s situation is at least somewhat unique, and different people have different wants and needs in terms of investing and purchasing gold. Review the options listed here and make sure that your decision making is best suited to fit your personal needs in terms of gold purchasing. Always think before you buy!
Check back for more on gold investments and GoldMoney here at EduMuch!