Published on: January 02, 2023
Author: Milos Jakovljevic
|Table of Content
|How to invest in physical gold
|Invest in gold by purchasing stock in gold miners
|Invest in gold ETFs and gold mutual funds
|Using futures and options to invest in gold
|What are the different ways to invest in gold?
Gold is a precious commodity that has been a medium of exchange for thousands of years. It first surfaced in Ancient Egypt, having been discovered and studied by alchemists who lived in the ancient civilization. How gold is traded has transformed from a relatively rudimentary and undeveloped method to a multi-faceted, internationally tradable investment. You can find it in rap videos, bracelets, and as a coin in your pocket.
If you're looking to invest in gold, there are several ways you can do it. Not only can you buy gold as an investment, but investment in gold also has a variety of avenues you can explore. Please be aware that any investment you undertake carries risk. There is a danger of losing all your investment, even if you undertake serious risk management.
Physical gold is the oldest method of investing in this precious metal and is one of the most visible commodities on the financial market today. It can take many forms, including:
The most popular method of physical gold investments are gold rings, necklaces and other forms of jewelry. Despite the mass production of these goods, they still hold long-term value. Gold bullions are much less likely to be the optimum type of gold investment due to overheads such as storage costs and the logistics of ownership.
As far as gold works as a tangible asset, jewelry and coin ownership far supersede bullion ownership. However, there are instances where gold bullion ownership could be beneficial. Overall, gold is seen as a reliable hedge against inflation, which is the commodity's prime selling point.
Physical gold ownership means you have the flexibility to offset investments, digital asset investments such as Bitcoin, various altcoins and forex or stock investments. You can also trade gold as a foreign currency pair (XAU), measured against an ounce of gold. The most common currency pair is the US Dollar (USD).
However, you must carefully research these markets before you use your capital to invest. Even in the event of solid market understanding, you could still lose all of your investment due to the volatile nature of marketplaces.
If you're looking for a more flexible investment in gold, purchasing stock from gold miners may be more suitable. This version of indirect commodity investing is one of the main ways investment banks enter the market. Compared to physical ownership, investing in gold by purchasing stock in gold miners means investing in the companies that fuel the market's success without having to own it physically.
Investing in stock continues to evolve into a market where more bridges are appearing for retail investors. A retail investor is somebody like you or me who invests with their savings or disposable income. Institutional investors are large institutions that can move the market with billion-dollar investments.
The amana app allows you to invest in gold, cryptocurrency, stock and forex all on one platform. Whilst many mobile trading apps have been created over the last half a decade, finding one that can do everything and doesn't charge you any additional commission (other than what they pay) is a rarity. amana also has a no hidden fees and no minimum balance policy, which means you can invest as little as you want, whenever you want.
ETFs (Exchange Traded Funds) may seem like a complex term or jargon for someone who doesn't know the industry in great depth. However, ETFs are fairly easy to understand. Imagine a stock investment in gold, as we explained in the previous section, and then imagine a collection of these companies. An ETF is simply a packaged combination of companies that either track the gold price or combine an investment in several companies involved in gold development.
This is the most flexible method of investing in gold that we have discussed today, but it also has downsides. Due to ETFs and GMFs containing a variety of gold investments, it is only sometimes directly attached to the commodity's price. In addition, they're not considered an inviting choice for investors who want short-term profits instead of long-term investments.
If you're looking to invest in futures and options, advances in digital technology have afforded you this luxury. This type of investment works differently from a tangible physical investment or investing in a stock at a live price. One thing to ensure you take away from futures and options trading is that it isn’t recommended for beginners.
Finding your feet in the market with live trading first is usually the best place to begin. Once you understand chart analysis and the factors that can drive the market up and down, futures and options might be attractive trading methods you can employ.
Using futures to trade gold means you can agree on a future date and price for your investment. The amount of gold is also agreed upon before the futures contract is created.
Whilst futures give you the option to purchase the contract, options give you more flexibility and leverage the initial investment. In comparison to futures trading, the key downside is that you have to pay a premium to keep the options preference valid. This can result in serious losses if the market is operating in a volatile manner. Hence, we must reiterate that this gold investment method is usually limited to experienced and professional traders. However, your capital is always at risk, even if you have plenty of experience and knowledge. There is no guaranteed way to make money in trading.
To recap what we have discussed today, there are several ways you can trade gold and use the commodity to provide marginal gains for you. It can be tangible, such as a bullion, gold coins or other forms of jewellery like necklaces and rings. Another option is investing through an ETF (Exchange Traded Fund), stock or a GMF (Gold Mutual Fund).
You must be aware that your capital is at risk, regardless of how much you understand a market or the variables that drive it in one direction. Understanding how the market works and using world-class trading apps like amana is a strong starting point. In addition, by teaching yourself the ability to understand chart analysis, you stand in a better position to manage any losses.