Gold is very good commodity to invest because it provides protection against inflation, degradation of currency and other uncertain conditions at a global level. There are many ways to invest in gold, and following are top 5 ways to invest in the gold.
Jewelry is a popular way to hold gold because it has a higher demand. The percentage of the pure gold in items contains 24K gold that means the gold contains 10 parts gold and 14 parts of an additional metal. If you want to buy the jewelry as an investment, then you should understand the karat amounts and the effects of this amount on the price and durability. You should consider the weight of gold in grams because the higher the gram means the piece is really expensive. It is important to consider the authenticity of the retailer before purchasing a quality piece of the gold jewelry.
The most popular gold coins are American Eagle, American Buffalo and St. Gauden that can be stored in the safety deposit boxes. You should avoid big premiums while purchasing the gold coins and bullion. It will be good to buy close to the spot gold prices or at 10% premium. The higher premium will increase the gold price, and increase your profit as well. The coins can be obtained from the national mint that are sold at a 4% markup, and the margin of the retailer can be 1% to 3%. The following formula will help you to calculate the premium of gold.
The gold exchange traded funds are very famous to include gold in your portfolio without storing the physical metal. The SPDR gold shares are the most heavily traded ETF with good inflows in the U.S. economy. If you are looking for a cheapest ETF, then you can prefer iShares Comex Gold Trust (IAU) with 0.25% fee. Each share of ETFs is equivalent to 1/10 of an ounce of the gold. It is a good tool for investors and the expense ratios may vary between 0.25% and 0.50%. The gold prices may vary from place to place based on the value of currency and position of the economy.
If you are ready to bear more risk, you can exchange your debt instruments and traded notes. You need to give money to the bank upon maturity, and the bank will pay you a return based on the performance of ETN and the gold prices. The UBS Bloomberg CMCI Gold ETN (UBG), DB Gold Double Short ETN (DZZ), DB Gold Short ETN (DGZ) and DB Gold Double Long ETN (DGP) are some popular ETNs.
Gold Miner Stocks
You can invest in gold through gold-mining stocks because these have the 3-to-1 leverage to the prices of the gold. These are quite risky because these are traded in the broader equity market. There are lots of investors that make the mistake of buying small gold miners, and this means no cash flow. These types of stocks are just like lottery tickets, and there will be no certainty about the outcomes. The higher gold prices can increase your net profit, and there are lots of factors that can affect your profit like currency concerns, energy costs, and geopolitical factors.