Of all the precious metals, gold is the most popular as an investment. Gold is often seen as a store of value, but it’s also important to note that like all exchange-traded markets, gold prices can be driven by speculation. Some investors buy it to hedge risk. Others buy it in the hope that the price will rise.
There are several ways to invest in gold:
Gold Stocks and Funds – Buying stock in a gold mining firm or buying into a mutual fund that invests in gold bullion is a common way to invest in gold. Most brokerage firms buy and sell these financial instruments. Gold stocks and mutual funds may offer more liquidity than actual gold, and there’s no need for an investor to store or protect gold investments purchased in this form. That said, any gold stock or mutual fund investment may carry inherent risk and may drop in value regardless of the price of gold.
Bullion and Bullion Coins – Bullion is a bulk quantity of metal, typically cast as ingots or bars. Dealers and some banks and brokerages sell bullion. Bullion coins are struck from precious metal – usually gold, platinum, or silver – and kept as an investment. They are not used in daily commerce. The value of bullion coins is determined mostly by their precious metals content rather than by rarity and condition. Prices may change throughout the day, depending on the prices for precious metals in the world markets. Coin dealers and some banks, brokerage firms, and precious metal dealers buy and sell bullion coins.
Collectible Coins – These coins have some historic or aesthetic value to coin collectors. Most collectible coins have a market value that exceeds their face value or their metal content. This collectible value is called numismatic value. The coin dealers who sell collectible coins often have valuable coins graded by professional services, but grading can be subjective.
Portfolio Diversification with Gold
Gold prices may move independently of other financial assets.
The U.S. Mint reports that many investment experts believe that adding gold to a portfolio may improve its performance, “because the forces that determine gold prices usually differ from, and in many cases counter, the forces that determine the price of many financial assets. Investment advisors often suggest that this relationship may help to reduce portfolio volatility.”