If you’re considering investing in gold, you have a plethora of opportunities. You can either make direct gold investments or invest indirectly. Either way, gold is a great option for protecting against inflation and lowering the overall risk associated with your portfolio.
It can be difficult to know which option to choose, and each comes with its own pros and cons. Read on to learn more about the different types of gold you can invest in and which is best for your portfolio.
Types of Gold
Before exploring the different types of gold, first, understand the way gold is valued. It doesn’t sit at a fixed price as you might expect. Instead, its value changes several times a day based on a series of transactions.
These transactions are monitored by two conglomerates, the LBMA and COMEX. Gold also has something called a “spot price,” which is the overall average value at which gold is bought and sold.
Now that we’ve covered gold pricing, here are some of your options for buying gold. Whichever you choose, be careful of scams and verify that your gold is legitimate.
Gold bullion is any type of pure or near-pure gold and can come in many forms. However, it usually resembles a classic bar of gold.
For smaller investors, this is a pretty standard choice. Buying small-sized bars and coins can allow you to easily liquidate part of your investment as you please.
If you’re thinking of making a large investment in gold, bullion might not be the best choice for you. Their large size makes them quite difficult to buy and sell, meaning your investment isn’t easy to liquidate.
Coins offer an additional benefit: they can be sold at a premium of 1%-10% of the underlying gold value. These are usually minted in smaller sizes, again making them easier to liquidate. It’s also fairly easy to find reputable dealers, meaning you’ll have a much easier time when it comes to selling your gold.
Gold bullion and gold coins are both considered direct investments in gold, meaning their price may fluctuate quickly.
Gold ETFs and Mutual Funds
Investing in a gold-based ETF is a great alternative to direct investment. Each share of the ETF represents a set amount of gold, i.e., 1/8 of an ounce.
Mutual funds also allow you to diversify your portfolio among different companies, safeguarding against potential issues. For most investors, indirect investment in gold through ETFs or mutual funds is the most accessible option.
Gold Futures and Options
If you’re a more experienced investor, you may want to consider investing in gold futures and options. Futures serve as contracts to buy and sell a given amount of gold at some specified date in the future. Options on futures allow more leeway for the investor to make certain changes to the contract within a given time frame.
Buying and Selling Gold
Whichever opportunity you choose, investing in types of gold is a great way to stabilize your portfolio and protect against inflation. For more investment tips and advice, check out our Finance section