How to invest in gold: 5 ways to buy and sell it 2021

 How to invest in gold: 5 ways to buy and sell it 2021

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here’s an explanation for how we make money.

When economic times get tough or the stock market looks jittery, investors often turn to gold as a safe haven.  For example, interest in gold surged in early 2020 during the coronavirus crisis and the recession that followed it, as investors looked for a safe asset to park their money.

Savers and investors like gold for many reasons, and it has attributes that make the commodity a good counterpoint to traditional securities such as stocks and bonds. They perceive gold as a store of value, even though it’s an asset that doesn’t produce cash flow. Some see gold as a hedge against inflation, as they worry that the Fed’s actions to stimulate the economy – such as near-zero interest rates – and government spending may send inflation racing higher.

Why investors like gold

“Gold has a proven track record for returns, liquidity, and low correlations, making it a highly effective diversifier,” says Juan Carlos Artigas, director of investment research at the World Gold Council.

These qualities are especially important for investors:

Returns: Gold has outperformed stocks and bonds over certain stretches, though it doesn’t always beat them.

Liquidity: If you’re buying certain kinds of gold-based assets, you can readily convert them to cash.

Low correlations: Gold often performs differently from stocks and bonds, meaning when they go up, gold may go down or vice versa.

In addition, gold also offers potential other advantages:

Diversification: Because gold is not highly correlated to other assets, it can help diversify portfolios, actually making them less risky.

Defensive store of value: Investors often retreat to gold when they perceive threats to the economy, making it a defensive investment.

Those are a few of the major benefits of gold, but the investment – like all investments – is not without risks and drawbacks.

While gold performs well sometimes, it’s not always clear when to purchase it. Since gold by itself doesn’t produce cash flow, it’s difficult to determine when it’s cheap. That’s not the case with stocks, where there are clearer signals based on the company’s earnings.

Moreover, because gold doesn’t produce cash flow, in order to make a profit on gold, investors must rely on someone else paying more for the metal than they did. In contrast, owners of a business – such as a gold miner – can profit not only from the rising price of gold but also from the business increasing its earnings. So there are multiple ways to invest and win with gold.

5 ways to buy and sell gold

Here are five different ways to own gold and a look at some of the risks that come with each.

1. Gold bullion

One of the more emotionally satisfying ways to own gold is to purchase it in bars or in coins. You’ll have the satisfaction of looking at it and touching it, but ownership has serious drawbacks, too, if you own more than just a little bit. One of the largest drawbacks is probably the need to safeguard the physical gold and insure it.

To make a profit, owners of physical gold are wholly reliant on the commodity’s price rising, in contrast to owners of a business, where the company can produce more gold and therefore more profit, driving their investment higher.

You can purchase gold bullion in a number of ways: through an online dealer such as APMEX or JM Bullion, or even a local dealer or collector. A pawn shop may also sell gold. Note gold’s spot price as you’re buying, so that you can make a fair deal. You may want to transact in bars rather than coins, because you’ll likely pay a price for a coin’s collector value rather than its gold content.

Risks: The biggest risk is that someone can physically take the gold from you, if you don’t keep your holdings protected. The second-biggest risk occurs if you need to sell your gold. It can be difficult to receive the full market value for your holdings, especially if they’re coins and you need the money quickly. So you may have to settle for selling your holdings for much less than they might otherwise command on a national market.

2. Gold futures

Gold futures are a good way to speculate on the price of gold rising (or falling), and you could even take physical delivery of gold, if you wanted, though that’s not what motivates speculators.

The biggest advantage of using futures to invest in gold is the immense amount of leverage that you can use. In other words, you can own a lot of gold futures for a relatively small sum of money. If gold futures move in the direction you think, you can make a lot of money very quickly.

Risks: The leverage for futures investors cuts both ways, however. If gold moves against you, you’ll be forced to put up substantial sums of money to maintain the contract or otherwise the broker will close the position. So while the futures market allows you to make a lot of money, you can lose it just as quickly.

In general, the futures market is for sophisticated investors, and you’ll need a broker that allows futures trading, and not all of the major brokers provide this service.

3. ETFs that own gold

If you don’t want the hassle of owning physical gold, then a great alternative is to buy an ETF that tracks the commodity. Three of the largest ETFs include SPDR Gold Trust, iShares Gold Trust and Aberdeen Standard Physical Swiss Gold Shares ETF. The goals of ETFs such as these is to match the performance of gold minus the annual expense ratio. The expense ratios on the funds above are only 0.4 percent, 0.25 percent and 0.17 percent, respectively, as of May 2020.

The other big benefit to owning an ETF over bullion is that it’s more readily exchangeable for cash at the market price. You can trade the fund on any day the market is open for the going price. So gold ETFs are more liquid than physical gold, and you can trade them from the comfort of your home.

Risks: ETFs give you exposure to the price of gold, so if it rises or falls, the fund should perform similarly, again minus the cost of the fund itself. Like stocks, gold can be volatile sometimes, too. While these ETFs own physical gold, they allow you to avoid the biggest risk of owning the physical commodity: the illiquidity and difficulty of obtaining full value for your holdings.

4. Mining stocks

Another way to take advantage of rising gold prices is to own the miners who produce the stuff.

In some ways this may be the best alternative for investors, because they can profit in more than one way on gold. First, if gold rises, the miner’s profits rise, too. Second, the miner has the ability to raise production over time, giving a double whammy effect. So you get two ways to win, and that’s better than relying on the rising price of gold alone to buoy your investment.

Risks: If you’re investing in individual stocks, you’ll need to understand the business carefully. There are a number of tremendously risky miners out there, so you’ll want to be careful about selecting a proven player in the industry. It’s probably best to avoid small miners and those that don’t yet have a producing mine. Finally, like all stocks, mining stocks can have volatile prices.

5. ETFs that own mining stocks

Don’t want to dig much into individual gold companies? Then buying an ETF could make a lot of sense. Gold miner ETFs will give you exposure to the biggest gold miners in the market. Since these funds are diversified across this sector, you won’t be hurt much from the underperformance of any single miner.

The larger funds in this sector include VanEck Vectors Gold Miners ETF, VanEck Vectors Junior Gold Miners ETF and iShares MSCI Global Gold Miners ETF. The expense ratios on those funds are 0.52 percent, 0.53 percent and 0.39 percent, respectively, as of May 2020. These funds offer the advantages of owning individual miners with the safety of diversification.

Risks: While the diversified ETF protects you against any one company doing poorly, it won’t protect you against something that affects the whole industry, such as sustained low gold prices. And be careful when you’re selecting your fund: not all funds are created equal. Some funds have established miners, while others have junior miners, which are more risky.

Bottom line

Investing in gold is not for everyone, and some investors stick with placing their bets on cash-flowing businesses rather than have to rely on someone else to pay more for the shiny metal. That’s one reason legendary investors such as Warren Buffett caution against investing in gold and instead advocate buying cash-flowing businesses. Plus, it’s simple to own stocks or funds, and they’re highly liquid, so you can quickly convert your position to cash, if you need to.

It’s easy to get started buying a fund – here are the best companies for ETFs.

Learn more:

What are ETFs?

11 passive income ideas to help you make money

15 best investments this year

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

Gold price expectations Gold stock exchange Gold investment gold and the dollar Gold bullion Benefits of saving gold The best time to buy gold which is better Saving money or gold An expert in gold prices Gold certificates in international banks Gold price forecasts The price of gold against the dollar Gold ingot The price of gold ingot Gold forecast The price of gold ingot 50 Gram gold bullion Investing in gold Gold price forecast 2020 Gold price forecast 2020 Gold ingot 100 grams for sale Gold price forecast Gold prices against the dollar Gold price forecast tomorrow Gold bar 10 gram Gold forecast today Gold bar price today Gold analysts forecast Gold prices and the dollar today Will it rise Gold in the coming days, gold ingot, weight of gold ingot, gold ingot prices, will the price of gold rise in the coming days, gold ingot 20 grams, forecasts of gold tomorrow, gold prices and the dollar today, gold bar 1 gram, today’s gold price forecast, 2021 gold price forecast, my experience with gold bullion, 5 gram gold bar Buying gold bars from Al-Rajhi Gold bars selling companies The price of gold and the dollar today How much is the price of a gold bar 1 kilo gold bars for sale The price of gold bars forecast Gold next week Gold bar 10 grams for sale Will the gold price increase in 2020 Will the price of gold decrease in the coming days Swiss gold bars for sale 24 carat gold bullion Gold price forecast in the coming days Al-Rajhi gold bars Today's gold bullion prices How much weight is the gold bar Buying gold bars Gold forecast 2020 gold price forecast 2020 gold price forecast 2019 gold ingot price 10 grams Will gold rise in the coming days How much is the price of a gold bar? Gold prices and the dollar The relationship of gold to the dollar Gold investment in banks Global gold price forecasts Banks that sell gold bars Gold ingot prices Global gold exchange forecast Gold 2021 Gold Predictions 2019 Gold Predictions 2020 Gold Price Forecasts for 2019 Gold Stock Exchange Today Will the Gold Price rise 2019 Types of Gold Bullion Global Gold Forecasts Gold Bar 100 Grams Price of Gold Bar 20 Grams Gold Price Forecast in the Coming Days Gold Prices in US Dollars Gold Bullion Gold Bar For sale, buy gold bars from the National Bank of Egypt, the price of gold bars today, invest in gold, National Bank, gold price forecasts, for the coming days, forecasts, Shame of gold, coming days, gold price forecasts for 2020, today’s gold price forecast and analysis, gold market forecasts, how to invest money in gold, gold bullion weights, gold bullion sizes, gold ingot price, buying gold bars, gold price forecasts, next week, today's gold price forecast, gold price forecast for the coming days, gold bar The price of the method of investing in gold bullion, the latest forecast of gold, gold ingot, how many grams, the expectations of gold prices in the coming days, the expectations of the price of gold 2020, the purchase of gold bars from the bank of the country. Gold 50 grams The price of a silver ingot, expectations of gold for tomorrow, a gold ingot 100 grams, the gold price exchange, the gold exchange directly, the prices of the gold bar today, the weight of the 24-carat gold bar. Will the price of gold decrease in the coming days? 10 gram gold Buy gold bars from the bank Gold price today against the dollar Gold price forecast 2020 Gold price forecast 2021 Kilo f gold bar The time has passed to buy gold in 2020 gold exchange The price of a gold bar is 100 grams The relationship between gold and the dollar Investing gold for beginners Buying gold bars from the National Bank of Egypt How much is the price of a gold bar today Gold ingot The expected price of gold prices Today’s global gold forecast How to invest in gold Gold price forecast in days Next The price of 21 carat gold against the dollar Bullion prices Will the price of gold rise in the coming days The best time to buy gold 2019 Invest in gold 2019 The price of a silver bar today News of gold and the dollar Gold ingot 5 kilograms Types of gold bars The price of a gold bar is 100 grams today The value of the gold bar you see in Gold bullion trading The future of gold prices Gold forecasts now expectations of the gold exchange Forms of gold bars expectations of a rise in gold prices expectations of the next period Analysts ’expectations for gold prices today Buying gold from the National Bank of gold bullion trading How to invest in gold How to invest in gold Gold price forecasts Predicting the price of gold Next week, forecasts of the gold price trend, the price of a gold bar 1000 grams, pictures of spike, gold, investment in gold, 2020, the price of a gold bar 24 The size of gold ingot Gold price forecasts in 2020 Is it expected a decrease in the price of gold Investing in gold The price of a 24-carat gold bar Predictions for the next period Gold forecasts for this week Gold forecasts for this week Global gold price expectations today Investing in gold bars The price of gold and the dollar Gold bar Gram Best types of gold bars Gold prices forecast which is better Investing in gold or stocks The price of a gold bar 5 grams Gold ingot 100 grams Forms of Swiss bars Ingot 100 grams The weight of gold bars Gold ingot shape 24k gold ingot Buy gold bars online Selling gold bars Gold forecast The coming days How do I invest my money in gold Gold price forecasts Next days What are the expectations of gold prices next week Ingot 10 grams of gold ingot How many kilograms of gold bar 1 gram Buy gold bars from the National Bank Gold prices House of bullion Gold prices of gold bars 20 grams of gold prices period The coming gold exchange Now the price of a gold bar is 50 grams today The sale of gold bars A 50 grams of gold ingot HSBC bank forecasts for gold prices The price of a gold bar 50 grams the weight of the bullion