Gold has long been regarded as a safe investment, especially in times of uncertainty. After its meteoric rise in price in the early 2000s, gold prices have softened and settled in the $1200/ounce area. But after several years of a bull run in the stock market and growing uncertainty around the impending Trump presidency, investing in gold is once again becoming a trendy investment.
If you decide to invest in gold, what is the best way to do it? As you might guess, it’s probably not the best decision to head to the mall and buy a chain directly from a jeweler. You’ll be paying plenty of markup on those for anything from “craftsmanship” to paying for the jeweler’s overhead. They’re so overpriced and gold would have to increase in price so much, we wouldn’t even consider it as way to invest in gold.
The key to investing gold is being able to buy and sell as close to spot as possible. A great way to accomplish this by using an online trading platform. You’ll pay a commission, but you can use live prices and are sure to get a pretty accurate price. Here are a couple good ways to trade directly:
Forex Brokers – There are a lot of Forex trading platforms out there, and you’ll find no shortage of firms advertising their services. Forex Brokers allow you to trade commodities such as gold, silver, and even pork, as well as currencies from USD to the Euro. You’ll be able to add money to your online account and trade quickly and easily online without leaving the comfort of your home.
Stock Brokers – Forex trading is a bit more advanced than typical stock trading. If you’re looking for an easier way to enter the gold market, there are gold ETF’s that allow you to invest in gold. We’ll ignore the risky leveraged ETF instruments for now and assume you’re more of a long-term investor, in which case ETF’s such as $GLD (SPDR Gold Trust) make the best choice. Go long to bet on gold; go short to bet against gold. ETF’s give you the flexibility to do both. $GLD tracks the price of gold on a percentage gain basis, so for all intents and purposes purchasing shares of the ETF is just like purchasing gold. Online brokers such as Ameritrade and Etrade are the most cost-effective ways to do this. You’ll just pay minimal commission fees per trade.
However, a lot of people don’t buy gold just for bumps in prices. Many people invest in gold as a hedge against financial institutions or an inherent mistrust of the system. If that’s the case, purchasing stock through an ETF or an online broker isn’t going to work. You’ll need to invest in the real thing.
When it comes to buying physical gold, the more gold you buy, the better the price you’re going to get. The more gold you’re selling, the better the price you’re going to get. Businesses work more on a “per transaction” basis more than a “margin” basis, so you’ll see closer to 100% payments the higher the volumes you’re trading.
Gold Coins – Pure gold coins are still being made and put into circulation. The most popular in the US are American Eagle Gold Coins. They have a purity of .999, or 24k gold, and come in sizes of 1oz, 1/2oz, 1/4oz, and 1/10oz. They have a legal tender of $50, which you’re not going to want to spend, since an ounce of gold is worth closer to $1200. Obtaining and holding on to these is a good way to invest in gold.
Other countries also produce gold coins for trading and investing purposes. Canada has the Canadian Gold Maple Leaf, while Turkey also produces gold coins.
Gold Bars – Are you a big spender? Fort Knox style gold bars go for over $500k, which would certainly be a nice talking piece for the living room. If you can’t swing that much, smaller blocks of gold can be bought online, from Kitko, or other gold distributors.
Scrap Gold – Better yet, you could become your own cash for gold company! There are plenty of resources out there where you can calculate the value of your gold, so find a friend who wants to sell his unwanted gold, calculate the price, and buy it right at spot! You’ll both end up getting more than you would otherwise.
So those are the best ways to get yourself into the gold market with minimal margin. Will gold prices go on another historic run? Will markets pull back? There are plenty of opportunities for gold to increase in value, so obtaining either physical gold or investing in an ETF would be a great opportunity to take advantage of price increases.