Gold is always preferred by investors as an alternate investment to hedge against market fluctuations and inflation. Whenever there is a decline in the stock market and dollar value decreases, the yellow metal rises in value. Hence Gold is used by investors to diversify their investment portfolio. It is also one of the most liquid forms of assets which can be converted to cash easily and never runs of market value. There are various methods to invest in Gold which include Gold mining stocks, Binary options, buying Gold ETFs (Exchange-Traded Funds) and purchasing Gold bullions.
Buying Gold Bullions:
Buying Gold coins or Bullion is one of the easiest ways to invest in Gold because it does not require you to maintain any trading account. But the drawback when you buy physical Gold in form of Bullion is that you have to spend additional money to insure and store it in a secure manner. Also you should be careful about the quality of bullion which you purchase. You should always purchase from licensed gold dealers or order from genuine websites. Bullion is usually sold as 24 carat bars which is 99.5% pure gold and are weighed in terms of ounces. You can also purchase 22 carat bullion which has small blend of copper to improve the durability of gold.
Gold Exchange Traded Funds (ETFs):
Gold ETFs are another easy method to invest in gold which can be bought through any trading account similar to stocks. An ETF is similar to mutual fund which is traded like ordinary stocks in a Stock Exchange. The portfolios of Gold ETFs are predetermined and won’t be changed in later point of time. Popular Gold ETFs are SPDR Gold shares (GLD) whose shares are based on $31 billion worth of Gold Bullion as underlying assets. You can also invest in leveraged Gold Exchange Traded funds such as Goldcorp (GG) and Proshares Ultra Gold (UGL) which provide two times short or long exposure when compared to normal ETFs. The advantage of Gold ETFs is that they can be bought and sold easily and the transaction cost is very low. But they are not tangible like Bullion or other forms of physical gold and can lose value under tough economic conditions.
Gold Mining Stocks:
You can also invest in Gold by purchasing shares of companies like Kinross Gold (KGC) or Barrick Gold (ABX) which mine and sell Gold. This allows investors to gain indirect exposure to the yellow metal. By investing in Gold mining stocks, investors can leverage higher gold prices through corporate operations. But the drawback is that investors will have to face operational risks of extracting gold from the earth as the cost can vary between companies. They will also be subject to management risks of the companies such as mining delays or wrong acquisitions which will result in fall of share prices of the particular company even though actual Gold price may be increasing in the market. Hence you should be very careful while investing in stocks of Gold mining companies and choose them wisely by studying their complete history.
One of the recent techniques to invest in Gold is through binary options. Binary options also called as Digital options and involves speculating the future price of an underlying assets at the expiry time and will yield considerable returns if the speculation is correct. You can purchase binary options against Gold as underlying asset and if you predict the price movement of Gold correctly, you can gain as high as 85% return on your investment. If you expect the gold value to go above the strike price, you can purchase a call option or if you expect gold value to go below the strike price, you can purchase a put option. You can invest in gold with binary options as they have minimal risk and guarantee very high returns. You should keep watching the market trends of gold regularly to accurately predict the future price movement.