The record high gold prices in recent years have caused many people to have a renewed interest in precious metals as an investment. Gold has shown a steady rise in price for the past several decades, with an especially strong increase in the past few years. It has shown to be an excellent hedge against inflation, and most gold investors have been very pleased with their returns from gold when compared to other investment options. If a person is interested in gold as an investment, it is smart to consider your options, as there are many ways to do it.
Investing in gold bullion is one of the most popular ways to invest. Bullion comes in the form of bars and coins, and is made of refined gold that is .999 in purity. These are made strictly for investment purposes, and do not have any additional numismatic value over the price of the metal. Generally you will purchase bullion in the form of coins, and can also be purchased as bars. They usually will have a slight premium over spot price, and when you sell them you will receive slightly less than spot price. This allows the dealer to make a profit on the transaction. The benefit of gold bullion is that it is easily recognizable and easy to find buyers who will purchase it.
Many coins minted around the world have been made from gold, generally as a high purity alloy with small amounts of other metals to increase hardness. The price of these coins will be based somewhat on the current gold price, but they will also have a numismatic value that will vary depending on the coin. This may be a good or bad thing depending on your knowledge of coin grading. For the average investor, this may not be the best option since minor grading differences may make hundreds or even thousands of dollars worth of price difference. If you do not have this experience you may want to choose different investing options.
Precious Metals Secure Storage
Another choice for investors is to purchase bullion through a company that stores your gold for you through a secure storage option. Rather than shipping bullion direct to you to store yourself at home or in a safe deposit box, these provide added security and are often insured (unlike safe deposit boxes at the bank). The major benefit is lower transaction costs, with both buy and sell prices at close to spot price. This is a worthy option to investigate, although many gold investors prefer to have the physical gold in hand, rather than stored at another location.
Exchange Traded Funds
Another option many investors consider is Exchange Traded Funds (ETFs). These are investments quite similar to a mutual fund, but ETFs consist of physical commodities, including precious metals. They are bought and sold through the stock exchange, and are tied closely to the spot price of the metal. This investment option allows you to buy and sell at very close to spot price, and many consider it to be the best option for gold investment, while others consider this to be similar to buying stocks and prefer to have physical gold in their hand.
Many people choose to invest directly in the mining companies that are finding the gold. This can be a good option, as successful companies have the potential for greater return than just the spot price. Of course the same point can be made the other way around, and a poorly managed company may perform poorly due to mismanagement, lower than expected mineral recovery, civil unrest, energy costs, and a variety of factors not associated with production rather than the gold price. Due to these risks, many consider mining companies to be a riskier investment than other stocks because of this volatility. And again, many people want physical gold in their possession, not paper.
Gold Nuggets and Specimens
Investing in natural gold nuggets is another popular way to invest in gold. Unlike refined gold bullion, nuggets and specimens have additional value as a collectable item, much like a mineral or gemstone. The value of a gold nugget can vary significantly based on the overall attractiveness and “eye appeal” of each one. Rare forms of crystalline gold, gold in quartz specimens, and larger than average nuggets can bring a significant premium over spot price.
Buy Natural Gold Nuggets
The choice of which way to best invest in precious metals will ultimately come down to the personal preference of the person involved. If you are looking for something that is more common and highly recognized, then refined bullion may be the preferred choice. If you prefer to hold something more unique and interesting then a collectable gold coin or natural gold nugget might be a better option.
For those who would rather not hold physical gold in their possession, investment in mining companies and exchange traded funds might work best. Each has its benefits and drawbacks, but with the skyrocketing price of gold in recent years, there is a good chance that any investment made in gold will be worthwhile.
(Note: This article is intended for informational purposes only. All investment involve risk.)