Discussion about investing in gold has increased in recent years due to economic variables ranging from inflation, money supply, and even the ongoing COVID-19 pandemic, causing the stock markets to reach extremes unseen before.
Generally, investors who want to invest in gold have three choices: purchase the physical asset, purchase shares of a mutual or exchange-traded fund (ETF), which replicates the price of gold, or trade futures and options in the commodities market. For average investors, for instance, buying gold coins is ideal, while sophisticated investors utilize advanced strategies via gold futures.
Owning physical gold has its hassles, including transaction fees, storage costs, and insurance. Investors who prefer a more liquid and low-cost entry into the gold market should consider either mutual funds and exchange-traded funds that replicate the movements of this commodity.
If you’re keen on electronic gold investment, here are some options you can consider:
One of the simplest and cost-effective options for gold investment is through Exchange Traded Funds (ETFs). This is designed to offer a simple, cost-efficient, and secure way to acquire physical gold by providing a return based on the movement of the gold price, all without dealing with costs of transport, storage, and insurance.
Gold stocks usually rise and fall faster than the price of gold itself. Moreover, individual companies are also subject to issues unrelated to bullion prices—including political factors or environmental problems. Therefore, investing in an ETF that owns gold stocks can be risky to play, but it offers good appreciation potential, something that bullion investment does not.
Gold Futures Options
Experienced investors who don’t like to risk a lot of capital may consider this option. These contracts represent the right but not the obligation to buy or sell gold at a specific price for a set amount of time. Of course, you’ll retain options whether you think the price of gold is going up or going down. If you missed, the maximum risk linked with the buying options is the premium you paid to enter the contract.
Call options on gold future are typically bought and sold through a futures broker. The options on SPDR Gold Shares ETF are also procured via investors and traded in a standard brokerage account that has received approval for options trading.
Gold Mining Stocks
If you’re finding it hard to get golds directly, you can consider gold mining stocks. However, note that gold stocks don’t necessarily move in concert with bullion prices since mining companies succeed or fail based on their individual operating performance and their deployment of capital and get profits.
e-Gold investment account
One of the easiest ways to get started with gold investment online is through banks. Applying for e-Gold Investment Account (eGIA) for instance will let you enjoy a simple and secure way to invest in gold. You won’t need millions or even thousands of dollars to get started with gold investment. eGIA lets you initially purchase from as low as 1 gram! Within an eGIA account, you can readily buy or sell gold as you please – much like stocks.
The Bottom Line
If you’re looking to invest in gold as part of a portfolio diversification strategy, ETFs are the best way to go. It’s best to buy from a reputable source like CIMB to ensure that you are buying exactly what is represented.