How can I invest in gold?

Gold offers many different opportunities for investment. The type you choose will depend on a range of factors, including your budget, the length of time you plan to hold your portfolio and the storage you have in mind.

Here are some of the most common ways to invest in the precious metal.

Physical assets

Many people like to know that they own physical assets, which is why gold bars and coins are so popular. One of the main advantages is that you can actually see and feel how much gold you have, which isn’t possible with some of the other popular investment methods.

However, owning physical assets brings its own set of challenges, not least because you will need a proper place to store it. Bullion vaults and safe deposit boxes are often considered two of the best options, as they can be properly guarded and monitored to ensure the safety of your investment.

Gold will generally hold its value well, so knowing you possess a certain amount of bars or coins will go some way towards making sure your portfolio remains profitable.

Gold accounts

Some investors choose to open gold accounts. These involve the storage of gold, which is then managed by a depository or bullion dealer.

There are three types of gold account available, so it is worthwhile weighing up the merits of each to decide whether it is right for you.

Allocated. An allocated account contains gold owned outright by the investor, which is then stored through an agreement with a custodian.

• Unallocated. This is in stark contrast to an allocated account, which contains gold owned by a bank. If the financial institution is declared insolvent, the gold will be taken away. The precious metal is effectively being lent to the bank in the same way as a cash deposit.

• Gold accumulation plan. A gold accumulation plan is largely considered to be a low-risk investment choice, enabling customers to amass funds based on average daily prices. It enables them to spread costs and protect themselves against some of the risks associated with gold price fluctuations.

Exchange traded funds

Exchange traded funds, or ETFs as they are often known, are financial products that have the backing of allocated gold bullion owned by the investor. The precious metal is essentially listed on a stock exchange, where it can be bought and sold much in the same way as shares.

The precise portfolio of the ETF is fixed beforehand and does not change as the funds are traded. There are dozens of risks associated with ETFs, including severe fluctuations in the market and associated tax issues. 

Financial instruments

Some investors decide to turn to other gold-linked products to ensure the safety of their investment. Among them are gold mining stocks and futures and options.

Gold mining stocks give investors a slice of the resources companies responsible for excavating the precious metal. This offers quite a different means of investing, as there will be no physical ownership of bullion.

As with any share scheme, there is the potential for these stocks to fluctuate on a daily basis. It therefore pays to carry out thorough research into how well certain companies are performing, as well as what the future might have in store.

For example, looking at future mining announcements can be a good place to start. Does the company have any plans for expansion over the coming years? How many mines are they currently operating?

As with any investment, buying gold either as a physical or non-physical asset involves a lot of research in order to maximise its potential. However, it is important to remember that physical assets are generally the preferred method for millions of people.

Visit guardian gold for more information on how you can buy gold and silver.

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