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5 Popular Ways to Invest in Gold: Which One is Right for You?
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Investors have long been drawn to gold as a safe-haven asset, particularly during times of economic uncertainty. With the recent turmoil in regional banks, the yellow metal is sparking interest once more.
In early March, the failures of Silicon Valley Bank and Signature Bank helped gold start a bull run that took gold from $1800 an ounce to $2050. This double-digit percentage move happened in just under a month and with the recent failure of First Republic, gold is shining in investor’s eyes again.
Many are now looking for ways to get exposure to this precious metal, but simply do not know how. Listed below are five ways you can invest in gold.
Gold ETFs
Gold exchange-traded funds (ETFs) are perhaps the most popular and easiest way to invest in gold. These funds invest in physical gold or gold futures contracts, which are traded on stock exchanges.
The price of gold ETFs is based on the current market price of gold, and they can be bought and sold like stocks.
One advantage of gold ETFs is that they allow investors to invest in gold without having to store the metal themselves. They also offer greater liquidity than physical gold, as they can be bought and sold throughout the trading day.
The most popular gold ETF is the SPDR Gold Shares (GLD - Free Report) , which is the largest gold ETF in the world. A few other options include the iShares Gold Trust (IAU) and the Aberdeen Standard Physical Gold Shares ETF (SGOL - Free Report) .
Gold Mining Stocks
A common thought is the only way investors can make money in gold is by selling it at a higher price. However, the gold miners help defeat this idea by paying investors a dividend. Because this dividend is dependent on how much the company can sell its gold for, itsvalue is typically tied to the price of gold.
Investing in gold mining stocks can be riskier than investing in gold ETFs, as these companies may face a variety of risks, such as changes in mining regulations or operational challenges. However, they may also offer greater potential for returns.
Gold futures are contracts to buy or sell a specific amount of gold at a predetermined price and date in the future. These futures contracts are traded on exchanges, such as the NYMEX and Chicago Mercantile Exchange.
Investing in gold futures can be risky, as they are highly leveraged and can require significant upfront capital. However, they can also offer the potential for high returns if the price of gold rises.
Trading gold futures can be bought with a traditional broker with a margin account. They are typically not appropriate for retail investors and in most cases should be left to the professionals.
Physical Gold
Investing in physical gold, such as gold coins or bars, is another option for those looking to get exposure. However, this option can be more challenging than investing in gold ETFs or mining stocks, as it requires storing and securing the gold. The storage costs can add up, taking away any net benefit from an increase in value.
One advantage of physical gold is that it offers investors a tangible asset that they can hold and touch. It can also serve as a hedge against inflation and other economic risks.
Gold Royalty and Streaming Companies
Gold royalty and streaming companies offer another way to invest in gold. These companies finance gold mining projects in exchange for a portion of the mine's future production, typically at a discounted price.
Investing in these companies can offer the potential for high returns, as they may benefit from rising gold prices and a steady stream of royalty payments. Some popular gold royalty and streaming companies include Franco-Nevada (FNV - Free Report) , Royal Gold (RGLD - Free Report) , and Wheaton Precious Metals (WPM).
In Summary
Investing in gold can be a smart way to diversify your portfolio and hedge against economic uncertainty. Whether you choose to invest in gold ETFs, mining stocks, futures contracts, physical gold, or royalty and streaming companies, be sure to do your research and consider the risks and potential rewards of each option.
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5 Popular Ways to Invest in Gold: Which One is Right for You?
Investors have long been drawn to gold as a safe-haven asset, particularly during times of economic uncertainty. With the recent turmoil in regional banks, the yellow metal is sparking interest once more.
In early March, the failures of Silicon Valley Bank and Signature Bank helped gold start a bull run that took gold from $1800 an ounce to $2050. This double-digit percentage move happened in just under a month and with the recent failure of First Republic, gold is shining in investor’s eyes again.
Many are now looking for ways to get exposure to this precious metal, but simply do not know how. Listed below are five ways you can invest in gold.
Gold ETFs
Gold exchange-traded funds (ETFs) are perhaps the most popular and easiest way to invest in gold. These funds invest in physical gold or gold futures contracts, which are traded on stock exchanges.
The price of gold ETFs is based on the current market price of gold, and they can be bought and sold like stocks.
One advantage of gold ETFs is that they allow investors to invest in gold without having to store the metal themselves. They also offer greater liquidity than physical gold, as they can be bought and sold throughout the trading day.
The most popular gold ETF is the SPDR Gold Shares (GLD - Free Report) , which is the largest gold ETF in the world. A few other options include the iShares Gold Trust (IAU) and the Aberdeen Standard Physical Gold Shares ETF (SGOL - Free Report) .
Gold Mining Stocks
A common thought is the only way investors can make money in gold is by selling it at a higher price. However, the gold miners help defeat this idea by paying investors a dividend. Because this dividend is dependent on how much the company can sell its gold for, itsvalue is typically tied to the price of gold.
Investing in gold mining stocks can be riskier than investing in gold ETFs, as these companies may face a variety of risks, such as changes in mining regulations or operational challenges. However, they may also offer greater potential for returns.
Some popular gold mining stocks include Barrick Gold (GOLD - Free Report) , Newmont Mining (NEM - Free Report) , and Franco-Nevada (FNV - Free Report) .
Gold Futures
Gold futures are contracts to buy or sell a specific amount of gold at a predetermined price and date in the future. These futures contracts are traded on exchanges, such as the NYMEX and Chicago Mercantile Exchange.
Investing in gold futures can be risky, as they are highly leveraged and can require significant upfront capital. However, they can also offer the potential for high returns if the price of gold rises.
Trading gold futures can be bought with a traditional broker with a margin account. They are typically not appropriate for retail investors and in most cases should be left to the professionals.
Physical Gold
Investing in physical gold, such as gold coins or bars, is another option for those looking to get exposure. However, this option can be more challenging than investing in gold ETFs or mining stocks, as it requires storing and securing the gold. The storage costs can add up, taking away any net benefit from an increase in value.
One advantage of physical gold is that it offers investors a tangible asset that they can hold and touch. It can also serve as a hedge against inflation and other economic risks.
Gold Royalty and Streaming Companies
Gold royalty and streaming companies offer another way to invest in gold. These companies finance gold mining projects in exchange for a portion of the mine's future production, typically at a discounted price.
Investing in these companies can offer the potential for high returns, as they may benefit from rising gold prices and a steady stream of royalty payments. Some popular gold royalty and streaming companies include Franco-Nevada (FNV - Free Report) , Royal Gold (RGLD - Free Report) , and Wheaton Precious Metals (WPM).
In Summary
Investing in gold can be a smart way to diversify your portfolio and hedge against economic uncertainty. Whether you choose to invest in gold ETFs, mining stocks, futures contracts, physical gold, or royalty and streaming companies, be sure to do your research and consider the risks and potential rewards of each option.