Investing in gold and silver can be an intelligent way to diversify one’s asset portfolio and be prepared for any economic uncertainty. These precious metals have been valuable for centuries and can serve as a store of value. Today, buying and trading gold and silver is possible without physically storing the asset at home. In this guide, we’ll explore different investing methods in gold and silver, explaining them point by point.
Investing in gold
For investing in gold, it is important to consider factors like storage, security, liquidity, market conditions, diversification of portfolio, tax implications, cost of ownership, premiums liable, and due diligence necessary before investing. These factors are highly influenced by market conditions, government policies, tax regularities, and lobbies that influence the prices of precious metals.
Buying physical gold is one of the simplest ways to invest in precious metals. Investors can purchase gold bullion coins made of pure gold, which are easy to store and trade. The carat and maker marks are embossed on the coins to certify their purity. One can also purchase special commemoration gold coins released only for a limited quantity.
American Gold Eagle, Canadian Maple Leaf, and South African Krugerrand are standard names for buying and selling pure gold coins. Alternatives to coins include gold bars in different sizes ranging from small one-gram bars to larger 1kilo ones. For example, Birch Gold Group is a well-known precious metals company that allows the buying and selling gold coins on its platform.
Also, investing in gold jewelry can be a dual-purpose approach, as consumers can wear it while it is appreciated. However, be cautious about high markups and design prices while purchasing the gold.
Exchange-traded funds (ETFs)
Exchange-traded funds, or ETFs, are like any stock that lets investors purchase a portion for a fixed price. For gold, exchange-traded funds are listed across regulatory authorities that track the price of gold, such as SPDR Gold Trust (GLD) or iShares Gold Trust (IAU). These ETFs offer liquidity and easy trading on stock exchanges.
Gold mining stocks and mutual funds
Another way to invest in gold stock is by trading in shares of gold mining companies. The performance of these stocks is influenced by the price of gold and the company’s portfolio management. Generally, an asset manager oversees these prices and ensures a steady return for investors while considering market volatility. One of the top advantages of mutual funds is diversification, even for precious metals like gold. Gold mutual funds pool multiple investors’ money in gold mining companies. The returns are divided equally or as indicated by the trust.
Gold futures and options
F&O is risky but promises good returns when managed by a seasoned fund manager. Investors can trade gold futures contracts on commodities exchanges. These contracts allow speculations on the future price of gold without owning physical gold. Alternatively, investors can purchase gold options to gain the right, but not the obligation, to buy or sell gold at a specific price in the future.
Another way to own gold without the physical storage issue is by buying allocated gold certificates, representing a specific amount of physical gold stored in a secure vault. Investors have ownership of the gold without taking physical possession. The second option is an unallocated certificate representing a claim on a pool of gold. They may carry counterparty risk, so choose reputable issuers.
Investing in silver
Similar market factors affect silver prices, buying and selling individually or via platforms dealing with these precious metals.
Investors can acquire silver bullion coins like the American Silver Eagle, Canadian Silver Maple Leaf, or Austrian Silver Philharmonic from regulated trading platforms. These coins are easily recognizable and tradable. Also, similar to gold bars, one can purchase silver bars in various sizes, from small one-ounce bars to larger ones. Like gold bars, they offer lower premiums but may be less liquid. For silver, there is another way to own the asset physically: by buying silver rounds. These silver coins are not an official government-issued currency but still contain a specified amount of silver that adds some value to the portfolio.
Invest in exchange-traded funds like iShares Silver Trust (SLV) or Aberdeen Standard Physical Silver Shares ETF (SIVR) that track the price of silver. They provide liquidity and convenience without the hassle of tracking the price as a dedicated fund manager oversees the portfolio diversification for ETFs and lists prices to buy right, sit tight, and wait for the market to improve.
Silver mining stocks
Investing in stocks is risky for beginners. However, veteran investors can consider buying and trading in shares of silver mining companies to turn a decent profit margin as the prices rise and fall. Many day trading investors prefer this option trading on the commodities market. These stocks’ performance depends on the silver price and the company’s operations. For beginner investors looking to diversify their portfolio, there is always a more manageable option in the form of silver mutual funds of active silver mining companies.
Silver futures and options
Investors can trade silver futures contracts on commodities exchanges like gold to speculate on silver’s future price movements. Then, there is the alternative of options contracts, where investors can purchase silver options to gain the right to buy or sell silver at a pre-fixed price later.
Like gold, investors can buy allocated silver certificates representing specific quantities of physical silver held in secure storage. Alternatively, unallocated certificates represent a claim on a pool of silver investments.
There are multiple ways to invest in gold and silver, each with advantages and considerations. As an investor, the choice should align with end financial goals, risk tolerance, and investment horizon. Diversification and careful research are essential to successful precious metal investments for physical ownership, ETFs, mining stocks, or other vehicles.