The Three Best Ways to Invest in Gold

For centuries, buying gold has been recognized as one of the best ways to preserve one’s wealth and purchasing power. Gold is a unique investment, one that has served mankind well for thousands of years. Today, gold is still seen as a valuable commodity in the world of finance, as upwards in the billions of dollars are made each day on the exchange of gold.

Like most commodities, the price of gold is driven by supply and demand, as well as, saving factors, disposal factors, and the availability of it. The three best ways to invest in gold are gold bullion, ETF’s, and gold mutual funds.

Gold Bullion

The biggest advantage to owning gold bullion is that you have physical access to the gold itself. The biggest disadvantage is that they are easily counterfeited, so you’ll need to be sure you purchase from a reputable source. The most common form of investing in gold is through the purchase of bars, or bullion, from gold dealers.

Bullion (aka Good Delivery Bars) must be verified according to the specifications of the London Bullion Market, which has a verifiable chain of authenticity from the refiner all the way down to the storage vaults. Good delivery bars come in all different sizes from 12 kg to 1 Tael and 1 Tola. Good delivery bars held at home or in private vaults must be authenticated before they can return to LBMA markets.

Gold ETFs

Gold backed Exchange Traded Funds (ETFs) are traded on a variety of stock exchanges around the globe. Many of the Gold ETFs currently available are backed by gold bullion held in secure vaults. This is a principal distinction from derivative-based products that track the gold price, but which are not wholly-backed by physical gold bullion.

The biggest advantage to purchasing Gold ETFs is that it allows you to purchase gold shares at a lower cost than a mutual fund. The biggest disadvantage to owning gold EFTs is that they may not offer the same tax breaks as other other ETFs. The two most popular Gold ETFs are iShares Gold Trust (IAU) and SPDR Gold Shares (GLD).

Gold Mutual Funds

Gold mutual funds are funds that invest primarily in the equities of companies that mine, distribute, or process precious metals, and can also include a small amount of gold bullions. The biggest advantage to owning a gold mutual fund is that you have access to the value of gold, but without the problems of physically owning it.

The biggest disadvantage of owning a gold mutual fund is that the share price does not always reflect the actual price of the gold itself, but a speculation of the gold’s value. This means that the fund’s value can go significantly up or down at anytime. First Eagle Gold (SGGDX) and GAMCO Gold AAA (GOLDX) are two well-known Gold mutual funds.

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