When the stock market appears to be in a downward trend and becomes jittery, investors are often looking for safe havens where they can park their money. One of the more reliable options out there is gold, and with inflation on the horizon, it’s not surprising for many people to include a hedge against it. Gold and silver have track records of gains and safe assets.
Investors and savers like gold bullions and coins for various reasons. One is that it’s often a commodity with an opposite movement from the traditional stocks, bonds, and other securities. Many people perceive this as excellent storage that will retain its value even if it doesn’t generate monthly cash flow. Some people see this as a hedge against inflation when they begin to worry about the fiat money that the Feds use to stimulate an economy.
Ways to Buy and Sell Gold
1. As a Bullion
Some people want to see their wealth in a physical form, and this can be possible by buying gold bullion. Something is satisfying about touching and owning it. Others even include this in their retirement portfolio because they wanted to own more than just paper assets.
However, know that the ownership of gold bullion has disadvantages too. If you buy several bars at the same time, know that you have to find a place safe enough to keep it. You also need to insure it, and to make profits, you’re reliant on the market’s movement and higher pricing of the commodity. This is not the case with mining companies, wherein times that they produce more gold, they will have higher profits.
There are various ways that you can purchase gold, such as buying them from JM Bullion. You can learn more about JM Bullion in the link provided, and they will guide you through the complex process of buying and selling. Pawnshops may also tend to sell, and make sure to know about the current spot price before purchasing for a fair deal. Know that the biggest risk of bullion is getting stolen, so you need to look for a safe depository first before buying.
You can get into gold futures that speculate the prices of the precious metal in the market. You may either speculate if it’s rising or falling, and you could even make the physical delivery yourself. However, know that some speculators are not really motivated with the deliveries,
One of the biggest advantages in speculating the futures is that you can use a lot of leverage. You could own many futures with just a small investment. If your speculation is right, you’ll be able to make a lot of money quicker.
Know that the leverage may go against you if you speculate wrong. Another thing is, at some point, you may need to put up a large amount of money to maintain a margin or contractor you’ll find the broker closing the position for you. In this case, you may just have to accept a loss. While the futures market will allow you to make a lot of money in the short run, know that you can also lose it just as quickly.
It’s worth noting that the futures market is only recommended for sophisticated and experienced investors. You may also need a broker who specializes in dealing with futures.
3. Exchange-Traded Funds for Precious Metals
You might not want the hassle of owning gold or dealing with the futures market’s margin requirements and fast pace. If so, one of the best alternatives available is an exchange-traded fund. There are three major players in the market, including the Aberdeen Standard Physical Gold Shares ETF, SPDR Gold Shares (GLD), and iShares Gold Trust (IAU). The primary goal of these funds is to match the price performances of the precious metal without the annual expense ratio of ETFs.
Another benefit of owning an ETF over a coin or bullion is that it’s more liquid. You can readily exchange this for cash in the market, and it’s way easier to trade compared to bullion. Trade these funds during market opening days for its current prevailing price. The process is similarly close to selling stocks, and you can make the trade inside the comfort of your home. More information about ETFs on this page here: https://www.fool.com/investing/stock-market/market-sectors/materials/gold-stocks/gold-etfs/.
Know that there are certain risks to remember with ETFs. This will essentially give you exposure to the current price of the precious metals, so you’ll be affected by the rise and fall. As with any other investments, you should expect them to be volatile, but ETFs give you the chance of obtaining the whole value for your holdings without needing to protect a gold bar.
4. Stock Mining
Another way to take advantage of the rising prices is to start owning the mining business. You don’t need to own the mining equipment yourself. You just buy the stocks of the companies that do. This way, you’ll be able to get more profits when there’s more gold to sell.
This is an excellent alternative for any investor because it can have several advantages. For one, they can profit when the prices become high. Second, the miners usually can raise the production over time, and the effects can cascade into the markets.
Know that there are also risks involved in owning stocks of gold-mining companies. You need to know exactly the stock that you’re buying and if there’s a risk to the miners out there. Only choose the players who have proven their trustworthiness and reliability in the market and avoid the small miners. Another thing is that the stocks are volatile, so you may want to be careful.
5. ETFs Related to Mining Stocks
If you don’t want to dig more into the individual companies because you don’t have the time, it makes sense to buy an ETF. There are ETFs related to gold miners that will give you exposure to the bigger players in the industry. The funds are essentially spread into many sectors, and you won’t feel the loss much if one small miner underperforms.