Investors have a variety of options when it comes to investing in gold. From ancient civilizations to the modern era, gold has been the world's preferred currency and is now seen as a way to protect against political unrest and inflation. Many top investment advisors recommend portfolio allocation in commodities, including gold, to reduce overall portfolio risk. Gold is the most popular precious metal for investors, and they can buy it through exchange-traded funds (ETFs), shares in gold miners and partner companies, or physical products.
The SPDR Gold Shares ETF (GLD) holds physical gold and deposit receipts, and its price follows the price of physical bullion. Alternatives to investing in gold include buying shares in gold mining companies or gold exchange-traded funds (ETFs). VanEck Vectors Gold Miners ETF (GDX) is a passively managed fund that tracks an underlying basket of shares of gold mining and refining companies. If you decide that investing in physical gold is the right thing for you, there are a few things to keep in mind.
Throughout history, few investments have rivaled gold in popularity as a hedge against almost any kind of problem, from inflation to economic turmoil to currency fluctuations and war. If your primary interest is to use leverage to profit from rising gold prices, the futures market could be your answer, but keep in mind that there is a considerable amount of risk associated with any leverage-based holding. Investing in stocks of companies that extract, refine and trade gold is a much simpler proposition than buying physical gold. In other words, the coins that were used as money simply represented the gold (or silver) that was currently deposited in the bank.
The goal of ETFs like these is to match gold price performance minus the ETF's annual expense ratio.Gold has been an effective safe haven in several countries and is often recommended by investment advisors as a way to diversify risk. There is too much room between the price of most jewels and their gold value to be considered a real investment. With few exceptions, only bullion, futures and a handful of specialized funds provide an opportunity for direct investment in gold. And while it may be the most exciting way to invest in gold, it's also the hardest way to buy, store and sell.
The best strategy for investing in gold is to stick to your investment plan and not rush into buying gold bars.
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