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by Guest on September 13, 2010

Gold investments offer an excellent way for investors to store wealth in tough economic times.
Investors looking to buy gold will find that there are numerous options available, depending on
an investor¶s goal. The seven most popular gold investing options are listed below.

 

Investors who invest in physical gold will most often select an investment-grade gold, such as
gold bullion. Gold bullion may be purchased in bars or as coins. Jewelry is typically not
considered investment-grade gold bullion.

Gold bullion is not considered legal tender. Gold purity ranges from 22 karats to 24 karats.
Investors seeking to purchase gold bullion may obtain gold bullion from gold dealers, Swiss
banks, private dealers, coin dealers or directly from the producing mint. You can even buy gold
online. Investors will pay a slight premium of approximately one to three percent above the price
of the gold on the market. Some states will waive sales tax over purchases that exceed $1000.
Free shipping and free insurance may also be offered by dealers for bulk purchases.


 
Individuals may not want to physically store gold at their homes because of the risk of theft. For
this reason, gold may be stored at a safe facility such as a bank, off-site vault, or other locations.
One such company that offers this type of service is bullionvault.com.

Bullionvault allows individuals to purchase gold and store the gold at their facility. Armed
guards are available on staff and the gold is stored in a secure area for the investor. The storage is
similar to a private vault. The vault is open 24 hours per day and 7 days per week.

  

Gold mutual funds are another way to invest in gold without actually physically securing the
gold. Mutual funds involve gold mining securities and futures. They may also involve ETFs and
various gold related stocks. Gold mutual funds are diversified investments.
Investors should consult with a financial advisor to determine the best mutual funds to achieve
desired investment goals. Before selecting gold mutual funds, the expense ratios, turnovers, fund
loads and net asset values should be researched. Gold mutual funds may provide the stability in
your investments; however, gold is still considered a volatile investment. Some gold funds are
more aggressive than others, yet still safer than other investments.

  
Investors seeking to invest in gold without physical possession of the precious metal may also
select to purchase shares in gold mining companies. Investors expect the price of the gold mining
company¶s shares to rise as the price of the gold rises. However, these two events are not always
congruent. Smaller gold stocks are considered a more volatile investment than other gold
investments.

Investors may determine the success of the stock by examining the cost of the production costs
of gold versus the price of gold. If the price of gold is $700 and the cost to produce gold is $300,
then the gold mine¶s profit margin is $400. If the price of gold increases by 10%, there will be
approximately a 20% increase in the gold mine¶s profit. Conversely, a decrease in price will also
yield a 20% decrease. Some gold mining companies protect their investments by hedging the
price of gold 18 months in advance.

 
Securities backed by stored gold are called Exchange Traded Funds (ETFs). ETFs are open-end
investment companies. Investors buy and store gold bullion at the market price to secure the
purchase. Forty percent of gold investments are gold ETFs. Gold prices are significantly affected
by gold prices and demand. This method is more convenient than physically storing the bars of
gold in a personal location.

ETFs will not sell directly to investors. The shares are issued in blocks of 50,000 and are called
³Creation Units.´ Investors trading gold ETFs may be charged a small commission and an
annual storage fee. Storage, management fees, and insurance will accrue annually to cover the
costs of the gold represented by each certificate. Because of these fees, the value of each
certificate will decline over time.

 

Gold futures are another way to purchase gold without physically taking possession of the
precious metal. Gold futures require making a contract to purchase a certain amount of gold on a
given date. The price is also stated in the contract. If the gold price on the date of the contract is
lower than the gold price on the date the contract was made, then the investor will yield a profit.
However, if the price is lower, the investor loses money.

Investing in gold futures may be a risky investment, because investors must predict how the price
of gold will behave at some future point in time. Investors may invest as little as 10 percent of
the actual price in order to secure the contract price. If the price rises as much as 10 percent, an
individual¶s money may be doubled.

Likewise, if the price decreases by 10 percent, the investor will lose his or her initial investment.
Investors in gold futures must be aware of currency markets, foreign interests, and other factors
to determine how the price of gold will be affected.

 

  

Gold coins and gold jewelry are common ways of investing in gold. Rare coins are scarce or no
longer in production. For example, the 1909 VDB Lincoln Cent is rare because only 4,000 of the
coins have been certified. The Professional Coin Grading Service (PCGS) and the Numismatic
Guarantee Corporation (NGC) will verify the value of the coin for investment purposes. Coins
may be purchased for as little as $300 or as much as $25,000.

Gold jewelry is always in fashion in some form or another. Investors select both antique and
modern jewelry for investment purposes. Individuals investing in gold jewelry must research the
gold jewelry industry to determine which items will hold their value.

K  
K Shaun Connell is a full-time finance blogger and investor. He blogs about
investing in gold at Learn Gold Coins.