How to invest in gold

Throughout history, gold has remained an undisputed leader among investment assets. Investors from all over the world use it as a hedge against almost any kind of market disruption — from inflation and currency fluctuations to financial crises and war. 

Did you know that the California Gold Rush caused one of the largest migrations in American history? From 1848 to 1850, California’s non-native population rose from 1,000 to 100,000; people came from all 31 states and at least 25 countries. But the ones who really got successful were merchants — those who fed, clothed, supplied, and entertained prospectors.

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Today, you’ll learn a few ways to invest in gold, as well as a couple of recommendations on how to include gold in your capital-building system. 

Different ways of owning gold

The biggest difference between investing in gold several hundred years ago and today is the sheer number of investment types you can choose from. The most common ones are:

  • Gold coins
  • Gold bullion
  • Gold jewelry
  • Gold ETFs
  • Gold mutual funds
  • Gold bonds
  • Gold companies
  • Gold futures

To determine the best way to invest in gold online for you personally, look into each method separately. 

How to buy physical gold

Gold bar products are available at the American Precious Metals Exchange (APMEX), JM Bullion, Wholesale Coins Direct, and SD Bullion. If you’re buying from an independent online dealer, look them up on the official databases (if your country has one).

Aside from retail websites, there are ways to purchase coins and bars directly from state reserves. Depending on where you are in the world, the procedure may be slightly different. 

If you’re interested in collectible gold coins, South African Krugerrands, Canadian Maple Leafs, and American Gold Eagles are the most popular and widely available ones. 

How to invest in gold ETFs and gold mutual funds

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These are pooled investment securities that provide exposure to the biggest gold miners. The expense ratios are typically less than 1%, but it’s still a beginner-friendly, straightforward way to diversify and enter the gold market. ETFs can be found in your regular brokerage account. 

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Some of the larger funds are: 

  • VanEck Vectors Gold Miners ETF (GDX)
  • VanEck Vectors Junior Gold Miners ETF (GDXJ)
  • iShares MSCI Global Gold Miners ETF (RING)
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How to invest in gold bonds online

Gold bonds allow you to receive fixed interest, just like in bank fixed deposits. They also have no holding or storage costs and sometimes carry a guarantee (if they are issued by the government).

To invest in gold bonds online, you need to: 

  1. Find a government security denominated in gold grams (e.g., Sovereign Gold Bond).
  2. Assess the bond interest scheme (2.50% every year over for SGB).
  3. Send an application through the website of the listed scheduled commercial banks.
  4. Pay for the bond.
  5. Hold the asset for a tenure of 8 years. There may be an earlier exit option, but early redemption may have a fee.

How to purchase stock in gold mining companies

You can get exposure through equity in companies that mine for gold. For this, you just need to search for gold mining companies in your trading account and purchase individual stocks (any number of shares you want).

Some of the most popular stocks in the sector are: 

Let’s start with trading
  • Barrick Gold Corp. (NYSE:GOLD)
  • Newmont Corp. (NYSE:NEM) 
  • Torex Gold Resources Inc (XTSE:TXG)
  • Franco-Nevada Corp. (NYSE:FNV)
  • Calibre Mining Corp (OTC:CXBMF)

If you’re looking for gold futures, they might also be available on your brokerage platform. In general, the futures market is reserved for sophisticated investors, so make sure you have the skills and the risk tolerance for it.

Why investors like gold

“Gold and silver is money, everything else is credit.”

J.P. Morgan

Gold is considered a highly effective diversifier thanks to a proven track record in:

  • Returns: Historically, gold outperformed stocks and bonds.
  • Liquidity: Gold-based assets are easy to convert into cash.
  • Low correlations: Gold performs differently than other markets and doesn’t depend on other assets.

Overall, investors seem to value gold investments due to a defensive store of value and diversification. 

Besides, when fiat currencies lose their purchasing power to inflation, gold does not. For example, during the depression, the relative purchasing power of gold increased while other prices dropped sharply. The same happened in 2008 when gold prices increased 5.6%. In 2009, the figure rose to 23.4% — and to 29.5% in 2010.

Is now a good time to invest in gold?

Should you invest in the first days of the new year?

It can be hard to determine when the price of gold is low because it doesn’t perform in the same way as stocks or even other commodities. But if you’re in it for the long run, practically any time can be the right time to buy a safe-harbor asset.

As mentioned earlier, gold tends to become stronger in times of crisis. Many investors might cling to safe-haven assets or sit on cash. So, some say that it presents a good opportunity to invest in gold and silver online. Although nothing is guaranteed, the outlook is bullish.

Gold in the modern economy

Long gone are the times when government-issued currencies were backed by gold. However, gold still carries importance in today’s economy. Even the International Monetary Fund and several central banks have increased their gold reserves, which means they also see gold as a relevant asset to hold on to. 

Gold has efficiently preserved income for thousands of generations. And while it can be difficult to receive the full market value for gold holdings, it’s a great way to protect your funds from political and economic turmoil.

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