Eight Ways to Buy Gold

For hundreds of years, gold has been the favorite precious metal for both making beautiful and valuable jewelry and also as a store of value for the investor. While gold jewelry remains popular as a decorative art, it fails as an investment for the most part due to the large markup buyers pay. There are exceptions, but those are mostly limited to those people who can afford to have unique gold jewelry pieces designed and made, rather than the mass produced items usually seen.

If you want to invest in gold, there are many other possibilities available. Some people like the feel of the gold in their hands, while others want to own it, but not have to worry about storing it safely.

For those who don’t want to hold the physical gold, buying shares in an Exchange Traded Fund (ETF) is one way to go. You will need to have an account with a stock broker, since ETF’s trade like a stock. You will also need to do some research, because not all gold ETF’s invest the same way. Some buy gold bullion, store it and sell shares based on some fraction of an ounce of gold. SPDR Gold Trust (GLD) is set up this way.

Others, like ProShares Ultra Gold (UGL), use financial instruments like futures and options contracts to try and match the movement of the gold market. UGL actually attempts to move with twice the return of gold’s price movements.

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Still other ETF’s invest in gold mining shares. These will tend to fluctuate in a different manner than spot gold, since mining stocks can go up or down depending on many factors rather than just the price of gold.

Gold Mutual Funds are another way to invest in gold without physically holding it. They may invest in multiple gold mining companies as well as ETF’s, options and futures. Mutual funds are a bit different than stocks and ETF’s. You can’t just go online and buy immediately. When you place your order, your buy price will be the fund price at the end of that trading day. Once again, do your homework. Some mutual funds also charge a “load”, which is a fee either when purchasing, when selling or even both ways. There are many “no load” funds as well so chack carefully before investing.

Of course, you can purchase shares of gold mining companies directly on many stock exchanges. Once again, you need to do your homework, because companies range in size from a Barrick Gold (NYSE: ABX) which produces and sells millions of ounces per year to smaller companies which may own some claims, but have not yet produced an ounce of gold. Some of these smaller companies trade very few shares, so if you own them, you may not be able to sell them at a reasonable price in a hurry.

By Haadi