A Complete Gold Investment Guide

By John Otis

July 5, 2021

As Featured In:

Some links within this article are from our sponsors. We provide reliable, and accurate information. Read our Advertising Disclosure. 

When most people were asked to name a material with some intrinsic value, they'd immediately mention gold. While this may not be the most often-used currency in today's world, it's still incredibly valuable for those looking for a safe and solid investment.

For those who are risk-averse and those looking for a hedge against unstable political and economic futures, gold is an investment that shouldn't be ignored in portfolios.

There are many different ways to invest in gold. You can invest in gold bullion and various types of retirement instruments, gold mining companies, and even in gold jewelry.

In his gold investing guide, we'll cover each type of investment so you can determine which one is right for you.

#1: Physical Bullion

When most people think of storing gold, they think about gold bullion. While gold bullion is almost always popularly imagined as gold bars locked in a vault somewhere, the truth is that bullion actually refers to a specific type of gold that has been certified as to both its level of purity and its weight. Gold bullions can come in the form of not only bars, but also coins and other items.

The bar form of gold bullion is certainly awe-inspiring and a great fit for those who are looking to impress others with their wealth, but the average investor will immediately note that bullion can be huge and unwieldy.

This factor makes it hard to convert the bars into currency and thus make it harder to deal with as an investment instrument. If you're looking to leverage gold in a manner that preserves its liquidity, it simply makes sense to look for smaller forms like coins.

#2: Coins

Gold coins were long the go-to way to transfer wealth from one person to another. They were minted by kingdoms and nations, used as transactional tools that represented wealth and power.

Today, though, these coins are primarily held by investors as a way to preserve their wealth. Today's gold coins are bought at a premium from reputable dealers, but they have significant advantages that include: 

  • Smaller sizes, which make it easier to invest in gold by weight when compared to bars
  • Easier to find dealers, especially when compared to other forms of gold
  • Very easy to find widely-accepted lists of prices

With this said, it's essential to be careful about the types of coins in which you invest. When investing in gold, you're not looking at collectability most of the time - instead, you're looking at the value of the gold itself.

Getting caught up in the collector's game is an excellent way to introduce more volatility to your gold stores. Instead, it's vital that anyone investing stick to the more widely circulated coins like the Canadian Maple Leaf, South African Krugerrand, or even the U.S. Eagle. 

Like any other form of bullion, Coins still require owners to deal with insurance costs and storage fees, to say nothing of the fact that dealers themselves can tack on substantial fees to their products.

Bullion is a widely-used form of investment, but it's not suitable for everyone. That, perhaps, is why so many people look at specific investment instruments to help them extract more value from their gold holdings.

#3: ETF's and Mutual Funds

Since bullion isn't for everyone, it does make sense to look for other investment opportunities. One of the more prevalent alternatives is the use of a gold ETF, or exchange-traded fund.

These are investment instruments in which investors can buy a share representing a specific amount of gold instead of a company's share. These shares can then be purchased, sold, and traded just like any other type of stock.

For most, ETFs represent a more efficient way of investing in gold. Instead of dealing with storage fees or insurance, the investor picks a price point to feel safe investing and purchases a share in the ETF. This makes it very easy to invest and, with lower fees, to feel like those investments are doing some good.

It's generally a good idea to remember that while precious metals actually make up part of many different mutual fund portfolios, there aren't really all that many funds that only deal with gold.

Purchasing a share of an ETF that only deals with gold brings with it several benefits, ranging from being able to get shares in multiple gold companies while spending less to simply avoid doing some of the heavy research that's necessary for more direct types of investment.

When you're looking at funds, it's a good idea to figure out precisely what they are invested in. Some funds are all about gold prices, while others care more about mining companies.

Reading the prospectus for any given fund is a must, both to do your due diligence and to understand what you're getting into. If you can find the right fund, you'll be able to invest in a way that makes sense for you.

#4: Mining Companies

As you might expect, gold companies care quite a bit about the price of gold. If you are looking to bring up your own personal profits, it makes sense to look at gold mining companies as an investment in and of itself.

Most mining companies of note aren't small operations; instead, they're massive companies that tend to go about their business no matter what else is going on in the world. As an investor, this makes them attractive because they can do quite well even when other market segments are sagging.

Gold miners tend to feel like a safer investment than bullion itself for some people, but it's important to remember that no two mining companies are the same. 

If you want to invest, you're going to need to make sure that you take the time to look at the individual companies that make up this part of the market. As doing so tends to take up quite a bit of time, investing in this way can be a little too daunting for an inexperienced investor.

#5: Jewelry

It's impossible to talk about gold without talking about jewelry. More than half of the gold produced in the world today is used to create various forms of jewelry, and the demand for such items doesn't seem to be slowing down at all. When demand does drop, though, it usually does so in lockstep with the rising price of gold.

Investing in jewelry can be costly. You'd know that if you've ever gone into a jewelry store, but what you may not realize is that retail markup is often as much as four hundred percent. As such, most who look for jewelry as an investment stake out auctions or rummage through estate sales to find cheaper ways to build up their portfolios.

Owning jewelry does, however, bring with it a benefit that few other forms of owning gold can match - you can actually wear the pieces! While investing in gold this way might not be as profitable as looking for a good ETF or buying up bullion, it is certainly much more fun.

#5: Individual Retirement Accounts

Many people choose to use their gold investments as a basis for their retirement plans. With many global currencies dropping in value, investing in precious metals feels like it makes more sense than ever before.

Those who would prefer to uncouple their wealth from currencies that seem to be inflation-bound often choose alternatives like gold as safe ways to ensure that the money they've made will actually keep its value. Since gold tends to hold its value even when currency value changes, investing in a Gold IRA for one's retirement is a smart idea.

Gold brings with it certain advantages when one is looking at a retirement account. Gold is not as volatile as the stock or currency markets, often holding or even rising in value when other forms of investments falter.

Gold also has a history of holding value that far outstrips any currency that's used today, helping to build confidence in anyone who uses it as an investment tool. In fact, gold's long history of holding its value can be a very compelling argument in and of itself for using gold to help your current wealth stay safe.

Gold doesn't have to be your only investment, of course. Many people who are just getting into the workforce benefit from investing only a certain portion of their funds into gold, while taking some chances on more volatile investments while they can.

As you get closer to retirement, though, rolling those investments over into a good Gold IRA ensures that your hard work will still be able to pay off when you're ready to stop working.

Frequently Asked Questions

1. Is investing in gold a good idea?

Many financial analysts certainly believe so! Gold works very well as an investment when you're looking for a safety net for your future, especially if you have concerns about the stock market or even the global currency markets. Gold can form a solid bedrock to build a broad portfolio, especially when you have less time to invest.

With this said, gold is very much a long-term investment. It tends to hold its value and grow slowly, even if it does have its occasional moments of extreme movement.

Gold is not particularly volatile either way, which means that while you will avoid many of the short-term pitfalls that come with other forms of investments, you're also not going to get any of the short-term benefits.

2. How well does gold hold its value during a downturn?

Economic downturns are, unfortunately, simply a reality which all investors must eventually deal. When the stock markets start to slow down, many investors find that gold is an attractive way to hold onto their wealth. Gold tends to hold its value when all other investments fall apart.

Gold has managed to hold its value during almost every recession in US history, with the metal often rising in value even as the rest of the economy falls. It is the trust that people have in gold that helps it to keep its value in tough times, so gold will continue to be useful as an investment as long as that trust remains.

3. Where does gold demand come from?

For the most part, gold gets its value because people believe it has more inherent value than standard currencies. Around forty percent of gold demand comes from investors, with items ranging from coins to medals and bars making up this part of the market.

The bulk of the remainder of the demand for gold - around fifty percent - comes from the desire for jewelry, a desire that also drives up the prices of various other precious metals.

The industry also plays a role in the demand for gold. Around ten percent of demand comes from industries as wide-ranging as dentistry and electronics. More products than you might think actually make use of gold.

4. How is the price of gold determined?

Gold is a commodity. As such, its price essentially comes down to supply and demand. When there is a higher demand for gold, the price tends to go up.

When there is less of a demand, the price goes down. Gold tends to experience less volatility than most commodities when it comes to that rise and fall, but the impact of this basic economic principle can still be felt.

Gold's ability to withstand many market forces has more to do with its reputation than anything else. People tend to believe that gold has an inherent value, so few are willing to let the price go too low. Even when all other commodities start to fall, that faith in the intrinsic value of gold can stabilize its price and even cause it to rise.

Final Thoughts

Gold is a great way to protect your purchasing power by hedging against an inflationary economy. Considering that inflation is rising quickly due to trillions of dollars being printed out of thin air within the last year and a half, it's a great time to put a percentage of your portfolio into a gold investment. 

There are lots of gold companies out there who help investors with gold, silver and other precious metals. Based on customer reviews, there are 3 that stand out above the rest. 

Here are the top gold investing companies, each with hundreds of 5 star reviews online. 

  • Thousands of 5 star reviews
  • Top overall choice
  • Excellent customer experience
  • A+ BBB rating
  • Free gold investing kit
  • 4.96 overall rating on BBB
  • Excellent customer reviews
  • No cost portfolio review
  • Great leadership team
  • In business since 2003
  • Solid reviews
  • Great educators

John Otis

About the author - John Otis

In the modern age of reckless government spending and central bank money printing, my sole objective is to help others protect their savings, retirement, livelihoods, and purchasing power from currency devaluation. Otis Gold has been featured in Financial Times, Yahoo Finance, Kitco News, Motley Fool, Seeking Alpha, and more. If you have any questions or comments, leave them below. Welcome!

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Never miss a LATEST NEWs!

 Subscribe to our newsletter!