Investing In Gold - Welcome to my site!
There are various ways to invest in gold including gold (coins and bars), gold exchange traded funds (ETFs), gold certificates and e-gold. Dollar cost averaging is the most effective method of investing in gold. It involves putting a fixed amount of money towards gold each and every month. This helps to spread the risk over time therefore lessening the downside. Gold can provide protection, and insurance against inflation and uncertainty.
Investing in Physical Gold
Physical Gold includes bars and coins which are usually bought at various prices. Some of the most popular gold coins that one can invest in include American Buffalo, American Eagle and St. Gauden's. When investing in physical gold, one must avoid big premiums. Gold should be bought at a price that is closest to the spot price or 10% premium at most. Buying gold at a higher premium makes it harder to make profit. The premium of a gold product is calculated by subtracting the spot price from the quoted price, dividing the difference by the spot price and multiplying it by 100. It is also best to avoid investing in rare coins since these come with high premiums which make it harder to recoup their value.
Investing in Gold Exchange Traded Funds (ETFs)
ETFs allow investors to have gold exposure in their portfolios without the inconvenience of storing the metal. There are three major EFTs which are physically backed and track gold spot prices. SPDR gold shares (GLD) is the most heavily traded ETF while iShares Comex Gold Trust (IAU) is the cheapest with a 0.25% fee. However, a newer gold ETF known as ETFS Gold trust (SGOL) is also quite popular as it gives investors access to different types of gold.
To trade in ETFs one must pay a small commission; an annual storage fee is also charged. The amount of gold represented by each certificate declines every year since the annual expenses of the fund including storage and insurance are covered by selling a small amount of gold from each certificate. However, ETF companies do not trade directly with investors. Instead, they issue their shares in form of 'creation units' which are then split up and sold in secondary markets. Investors can sell their shares to other investors or to the EFT.
Gold certificates enable investors to own gold in unallocated and allocated accounts. The Perth Mint certificate program besides being the only government backed gold certificate program in the world is the most cost effective way to invest in gold over the long term. One advantage of gold certificates is that they are extremely liquid and investors can buy and sell them online. Buying gold bullion in unallocated accounts does not involve any holding or insurance fees.
E-gold refers to digital gold currency. Though there are several unscrupulous providers operating in e-gold, there are also two respected providers; Bullion Vault and Gold Money. They allow investors to buy and sell gold in allocated accounts instantly. It is a pretty safe way to invest in gold since all gold bars are audited and accounted for.