How to buy and invest in gold (for beginners)

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When recession looms, and when concerns about the dollar are raised, it’s not uncommon for some investors to turn to gold. For thousands of years, gold has been used as a store of value as well as a medium of exchange. As a precious metal, some believe it has intrinsic value, and many are confident that the price of gold will continue to rise over time.

Adding gold to your portfolio can add a degree of stability, and it can also help you hedge against inflation, since gold historically has moved  opposite to the U.S. dollar. If you’re interested in buying a gold stock, gold ETF or another type of gold investment, this guide can help you decide what type of gold investment is best for you.

When investing in physical gold, look for dealers that offer fine purity of at least 99.5%. Most reputable dealers offer investment-grade gold. However, you’ll pay a fee of between 2% and 5% on top of the current price of gold. Remember that the price of gold fluctuates throughout the day. The current price of gold at any moment is known as the spot price.

If you’re not sure about investing in physical gold — especially if you’re not sure where to store it — you can invest in gold stock, allowing you to own shares in mining companies that actually dig out and process the gold. Additionally, you can also invest in a gold ETF that offers exposure to multiple  mining companies and also physical gold. Both these options make it fairly easy to invest in gold without physically owning and storing the metal.

In general, beginners should focus on buying physical gold, gold stock and gold ETFs. 

How do you buy physical gold?

Buying gold can be straightforward. In most cases, you just need to find a business, bank, gold exchange or gold dealer that sells gold — you might even be able to buy gold from the local pawn shop. As long as you have the money to make the purchase, you should be able to buy gold.

Here are some things to keep in mind when buying gold for an investment:

  • Watch the spot price: The spot price is the price at which gold is selling at the moment on the markets. There are numerous websites that track the spot price throughout the day. Realize that the spot price changes frequently, and is not typically the price that you will pay yourself (or receive if you are selling gold). Think of gold spot price as the wholesale market rate. 
  • You’ll pay above the spot price: It’s common for gold sellers to charge 2% to 5% above the spot price of gold.
  • Purity: Gold is often mixed with other metals for smelting purposes. As a result, gold coins, bullion and jewelry are not 100% pure. However, for investments, you want gold that is at least 24 karat, which is more than 99% pure. When investing, your best value is going to be when you purchase gold that’s at least 99.5% pure. Many dealers offer gold that’s 99.99% pure. 
  • Coins vs. bars: In some cases, coins might have less pure gold than bars. While gold coins can make good investments, they don’t usually have the same level of purity as bars, a.k.a. gold bullion.
  • Scrap gold: Try to avoid buying scrap gold when investing. Gold jewelry, for example, might only be 14 karat or 18 karat gold, and not as valuable — or suitable for investing.
  • Storage: When you buy physical gold, you need a place to store it. Some sellers offer storage for a fee. In other cases, you can store the gold yourself, either at your location or at a bank. When storing at your location, consider purchasing a good safe. If you don’t have room to store the gold, paying for storage can make sense. Storage is usually charged as a percentage of the size of the account, up to 1.5%, depending on the company. While you might like to have the gold on hand, you run the risk of having it stolen from you if you don’t store it adequately, while off-site metal storage often comes with insurance.
  • Transport: Most online sellers will ship your gold to you. Many offer free shipping for a minimum purchase. Once you have the gold, you need to think about how you’ll transport it if needed. You can pay for couriers if needed. If you have it delivered to your home, and then want to move it to a storage facility or bank, you need a safe way to transport it. Depending on the situation, you can use a courier or armored car company, but this adds to the price.

Some investors like having the metal in hand. You purchase gold at its spot price, plus a premium paid to the gold seller. See our list of the best places to buy gold.

How beginners can invest in gold by buying gold ETF or gold stock:

  1. Open a brokerage account with a company that will allow you to buy individual stocks. You can open an account with a broker like Schwab or ETrade and access gold stocks and ETFs.
  2. Once you open your account, fund it with a bank transfer. 
  3. Once the money’s in there, you can search for the ticker symbols of gold stocks and ETFs that meet your needs. Most platforms allow you to research the companies’ performance against larger market trends and otherwise learn about the gold market. 
  4. Buy one or more gold assets. You can buy and sell at any time. 

Remember that a tried and true investing rule is that you are more likely to be successful if you buy and hold for a long period of time. Research gold mining companies and ETFs to determine how they’ve performed historically, as well as consider how you think they’ll perform in the future. There’s always the risk of loss any time you invest, but with careful choices, you can add gold investments to your portfolio in a way that supports your goals.

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Other ways to invest in gold:

There are more ways you can invest in gold beyond ETFs, including:

  • Gold stock: The purchase of gold stuck  actually  usually focuses on the purchase of  shares in a gold mining company. The share price of gold stocks don’t always move in the same direction as spot bullion prices because the mining companies’ profits depend on operations, and not just the price of gold metal commodities.
  • Gold futures options: A gold futures option allows you to buy gold at a set price. When you buy a futures options contract, you just have the choice to buy, or execute, the option, depending on whether you think the price will go up or down. If your hunch is right, you profit.

Which way you choose to invest in gold depends on your level of expertise as a trader. Only advanced traders — or those with plenty of money to lose — should consider options.

Of course, all investments are a gamble, and there are no guarantees for any profits. Have more questions about buying or investing in gold?

Frequently asked questions about buying gold ETF

How can I buy gold ETF?

You can invest in a gold ETF with just about any broker that supports individual stock trades. Because ETFs trade like stocks on an exchange, you can use your brokerage account to buy shares of a gold ETF. You just need the ticker symbol.

Do gold ETFs pay dividends?

You only receive dividends from gold ETFs that focus on mining stocks, and not all of these ETFs pay dividends. If you invest in an ETF that holds gold futures contracts or offer exposure to physical gold, you won’t receive dividends.

What is the best gold ETF to buy?

The best gold ETF depends on your goals, and what fits with your investment strategy. Look for a gold ETF that allows you to accomplish your objectives, whether that’s receiving dividends or whether it’s profiting from the spot price. Some of the more popular gold ETFs include:

  • SPDR Gold Shares (GLD)
  • VanEck Vectors Gold Miners ETF (GDX)
  • GraniteShares Gold Trust (BAR)
  • Sprott Gold Miners ETF (SGDM)
  • Sprott Physical Gold and Silver Trust (CEF)

There are scores of other gold ETF choices.

What is the safest gold ETF to buy?

There’s no way to be completely safe from loss when you invest. However, if you’re looking for safer choices, staying away from ETFs that focus on gold futures contracts can be a good idea. Gold futures ETFs are subject to problems, like contango, when the futures price is higher than the spot price and this can result in losses for the ETF. To avoid contango, look for ETFs that hold mining stocks or precious metals.

What is the largest gold ETF?

The largest gold ETF in the world is the SPDR Gold Shares Trust (GLD), with $66.99 billion in net assets.

Why are gold ETF prices different? How are gold ETF prices determined?

Gold ETF prices differ based on the assets they’re based on. Some ETFs base their prices on the spot gold price. Others are based on their pricing on the exchange. The value of the fund’s holdings are a major part of pricing, and that changes throughout the day.

Is a gold ETF better than physical gold?

This depends on your individual circumstances and investing strategy. In some cases, a gold ETF can make more sense if you want an accessible way to invest in gold at a low price, high liquidity and enjoy the security of a fund. On the other hand, physical gold can make more sense if you want the actual metal and you have a place to store it, and don’t mind paying the premium. Many people like buying precious metals because they are easy-to-understand investment. 

Are gold ETFs worth it?

Depending on your goals, a gold ETF can be worth the investment. Figure out how it fits into your overall investing strategy and determine whether it’s the right move for you.

Why invest in gold ETF?

Some investors like gold ETFs because they are often less expensive than buying physical gold. Additionally, you don’t have to worry about storing the gold and it’s liquid, so you can sell your ETF shares easily and quickly as the market goes up and down and to give you access to cash quickly.  

Frequently asked questions about investing in gold stock

How can I buy gold stock?

Gold stock is available through most brokers. You can buy a gold stock on the exchange with the help of a broker that allows you to buy and sell individual shares.

Where to buy gold stock?

Most traditional and online brokers offer access to gold stock. You can sign up for a broker like Schwab, Fidelity, Merrill Edge  or ETrade, or use an app like Robinhood, to buy gold stock.

Does gold have a stock?

No, gold doesn’t have its own stock. However, you can buy shares of publicly-traded gold mining companies.

What is the stock symbol for gold?

Gold doesn’t have a stock symbol, but there are stock tickers associated with various gold stocks. For example, the ticker for Barrick Gold Corporation is GOLD. If you’re looking for the spot price of gold as compared to the U.S. dollar, that symbol is XAU.

What is the stock price of gold?

As with other stock and commodity prices, gold prices fluctuate throughout the day. Gold stocks also see fluctuations in price throughout the day.

What is the best gold stock to buy?

The best gold stock to buy depends on your portfolio and investment strategy. Some of the gold stocks that might be considered include Barrick Gold Corp (GOLD), Agnico Eagle Mines Ltd (AEM) and Coeur Mining Inc (CDE).

Is it a good time to buy gold shares?

For the most part, a good time to buy gold shares is when it makes sense for your portfolio. Gold has been at record highs throughout 2020, and the opinions on whether it will continue to climb, or go down, are hotly debated. Consider your own position and goals and then decide if gold stocks should be part of your strategy.

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Frequently asked questions about buying gold IRA

What is a gold IRA?

A gold IRA is a self-directed IRA, that focuses on holding physical gold instead of stocks and bonds. An IRA, or “individual investment account,” is a tax-advantaged investment tool that is commonly used for long-term investments like retirement and college savings. Seek out an IRA that is self-directed so you can choose gold as the investment.

How does a gold IRA work?

Like a regular IRA, a gold IRA can hold the investment while it appreciates in a tax-advantaged manner. However, gold IRAs require you work with a custodian or trustee who will manage the IRA for you. To open a gold IRA you need to:

  • Find a custodian to manage your IRA. They will find the gold on your behalf.
  • Gold will be held at an approved depository, usually one that your custodian works with.
  • When you want to withdraw assets, your custodian will sell the gold on your behalf.

The IRS is very specific about the types of gold bullion and gold coins, a gold IRA that can be considered part of the IRA. You can’t just buy physical gold and then say it’s in an IRA. You need to use a custodian that offers this service to manage the gold in the IRA. Chances are that you will never actually see or touch the gold held in your gold IRA. Choose a custodian who can help you navigate the paperwork and hoops involved.

What’s in a gold IRA account?

You must hold investment-grade gold in your IRA. In most cases, you must keep coins or bars that meet IRS standards. The custodian you choose should help you meet those standards. 

How to invest in a gold IRA

You must keep the gold in a depository approved by the IRS — you can’t keep it in a safe at your house or in a safety deposit box at the bank. Look for an investment advisor or trust company that offers  “self-directed” IRAs. Most custodians that offer these IRAs can usually help you through the process of finding an approved depository and making sure the assets are appropriate. 

Is a gold IRA a gold investment?

Yes, investing in a gold IRA is a gold investment, as you hold physical gold in your IRA.

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Frequently asked questions about buying gold futures

What is the gold future?

A gold future is a contract to deliver gold for a set price at some point in the future. You don’t actually have to trade the gold itself if you trade the futures contracts.

How does gold futures work?

Gold futures contracts make use of leverage and flexibility. 

For example, depending on the contract, you might be able to control $15 worth of gold for each $1 you invest. So, if you have $10,000, you could potentially control up to $150,000 in contracts. The idea is that you’ll be able to buy gold at a set price in the future. If the price goes up, you get the gold at the lower agreed-upon price. If you’re trading futures, the idea is to sell your contract to someone else for a higher price before the date on the contract actually arrives — earning a profit. With leverage, you could turn a small increase in price into a bigger gain because you can control a larger amount. 

What is the symbol for gold futures?

There are different symbols for different futures contracts. However, COMEX Gold futures, one of the most common futures, has a ticker of GC.

How to buy gold futures?

You can buy gold futures on an exchange, like the Chicago Mercantile Exchange or the New York Mercantile Exchange. 

  1. Open an account with a broker that offers futures contracts, like the Chicago Mercantile Exchange or even a broker like ETrade or Interactive Brokers.
  2. Apply for a margin account if you want to use leverage.
  3. Review how to use the platform. Consider using a practice account first. Many brokers offer a practice account to help you get used to the platform.
  4. Connect your bank account so you can fund your futures trading account.

Frequently asked questions about investing in gold

Is gold a good investment?

Whether gold is a good investment depends on your own goals, financial situation and investment portfolio. Historically, though, gold has been a stable investment and one that returns value over time.

How much gold is a good investment?

How much gold you need in your portfolio depends on your own investing strategy and long-term goals. How much you get also depends on what you can afford.

What are the advantages of gold as an investment?

Gold has the advantage of being a physical investment that you can touch and store. Additionally, it is relatively stable, can act as a hedge against inflation and certain types of gold can be used as legal tender.

What are the disadvantages of gold as an investment?

One of the biggest disadvantages of gold is the fact that you need to figure out where to store it, or pay a fee to have someone else store it for you. Additionally, it’s not as easy to liquidate as some other investments.

If you are looking for quick gains, gold is not likely to meet your investment goals. 

Frequently asked questions about gold value

What is the average return on gold?

Gold has returned about 400% over the last 30 years. This interactive gold price chart is a useful way to understand the connection between the stock market and gold prices.

What will gold be worth 30 years?

There’s no way to completely predict what gold will be worth in 30 years. However, there’s a reasonable expectation that gold prices will trend upward over time — even Warren Buffett is investing in gold:

How do you buy physical gold?

Buying gold can be straightforward. In most cases, you just need to find a business, bank, gold exchange or gold dealer that sells gold; you might even be able to buy gold from the local pawn shop. As long as you have the money to make the purchase, you should be able to buy gold.

How can I buy gold ETF?

You can invest in a gold ETF with just about any broker that supports individual stock trades. Because ETFs trade like stocks on an exchange, you can use your brokerage account to buy shares of a gold ETF. You just need the ticker symbol.

Do gold ETFs pay dividends?

You only receive dividends from gold ETFs that focus on mining stocks, and not all of these ETFs pay dividends. If you invest in an ETF that holds gold futures contracts or offer exposure to physical gold, you won’t receive dividends.

What is the largest gold ETF?

The largest gold ETF in the world is the SPDR Gold Shares Trust (GLD), with $66.99 billion in net assets.

Miranda Marquit, MBA, has been writing about money on the internet for 15 years and has contributed to NPR, Forbes, The Hill, Marketwatch, and CNBC. She is an avid podcaster and enjoys travel, the outdoors, and playing board games with her teenage son. Miranda lives in Idaho and writes at MirandaMarquit.com.

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