How To Invest In Gold: An Investors Guide (Reasons to Invest in Gold)

How To Invest In Gold

The Royal Gold net worth hit 1.04 billion dollars early-2008. And that was almost twice what it was (0.59 billion dollars) on 06/25/2007. But what happened next knocked the socks off the feet of most gold investors as Royal Gold net worth exploded to 8.73 billion dollars in 2019. This uptrend has drawn a lot of attention as it advances through 2020. (Read the complete analysis here)


So to speak, if you believe now is the best time to enter the market, learning how to invest in gold effectively is important to make the most of your investment. This is especially important if you’re completely new to the market. Luckily, in this post, I have highlighted the 6 possible ways to go about it, with the 6 grouped into 2 categories.


Before going right in, here are some solid reasons to invest in gold right now according to financial experts and advisors.


5 Reasons To Invest In Gold


  • Reserve currency escape; for every fall in the value of reserve currencies, gold rises in value to become an escape route for reserve currency investors. This is one of the chief reasons to own gold.


  • Portfolio diversification; in the times of crisis in the basic financial instruments like stocks and real estates, your advisor takes to diversify your financial portfolio into gold to reduce risk and volatility.


  • Taking the edge of Geopolitical uncertainties; the European crisis of 2020 is responsible for the current big bang in gold value just like every other time. Every geopolitical uncertainty brings about opportunities to gold owners.


  • Hedge Against Inflation/ purchase power in deflation; during inflation, your investment in gold adds value because gold has an impressive hedge against inflation. On the flip side, gold crashes in price during deflation and that is the best time to buy.


  • An evergreen value; gold has been one of the first most valuable metals for centuries. It’s a financial instrument that never goes extinct.


Now, to the chief part.


How Can I Invest In Gold Without Holding It?


There are 4 possible ways to buy a part of the market while avoiding both the costs and risks of holding a physical gold bar or coin.


1. ETRs (Electronic Tradable Receipts); this follows the earliest mode of carrying out business transactions when goldsmiths issued paper receipts to whoever stores gold with them. Today, you can purchase an electronic tradeable receipt online and redeem it for physical gold in the future. This purchase is done from private enterprises like the Royal Canadian Mint who sell vault gold-backed ETRs to investors.


2. Gold Mining Stocks; if you are more inclined to buying stocks but want to do it with a gold mining company, this is for you. By buying a part of a gold miner, you are protected from the effects of the gold market. This is because most gold miners do not speculate on gold price but rather the overall cost of mining. Therefore, when buying gold mining stocks, the relevant factors affecting the cost of mining gold are to be focused on. Such factors include; technology, method of mining, stage of industrial development, transportation facilities, and more…


3. Derivatives; derivatives are the contract form of ETR. You create a future contract or a forward contract with a seller on when to buy and at what price to buy physical gold at a point in the future. The underlying asset of this contract is gold but the contract structure is not set in tone. You (the buyer) and the seller may design a completely unique contract that may not only highlight the ounces of gold to be delivered to you but also the location of delivery. Note that this is an OTC (over the counter) transaction so expect no controlling authority.


4. Gold Mutual Funds; here’s another way you can invest in gold whilst escaping the transaction cost, security cost, and storage cost of buying physical gold. By buying gold mutual funds, you invest in funds that are mutually related to gold. Those funds include exchange-traded funds and shares that are traded on NYSE (New York Stock Exchange). A unit of this Shares is one-tenth of the current price of one ounce of gold at the time of trading. So, if you’re buying a unit of the shares at the time when an ounce of gold is $15, 000, you’re buying the shares at $1, 500 worth.


But how about purchasing physical gold?


How To Invest In Physical Gold


Investing in physical gold is a more direct way. Investors in this category are the closest to the market in risk, profits, loss, volatility, and opportunities. So if you can bear the cost of the transaction, storage, and security for the purchased physical gold, you have two options.


  • Buy Gold Bullion; gold bullion is the yellow bar or coin of gold accessible for purchase to the average investor from a brokerage, a bank, or a precious metal trader. Just like bullion bars come in various sizes and weights that allow almost you to invest according to your money size, coins are the same. Basically, there are two categories of gold coins namely; the vintage numismatic coins and the well-circulated coins. The former is basically traded by collectors for their exceptional value. They are not priced equally with the generally circulated gold coins. When a generally circulated coin is to be sold alongside a vintage numismatic one, the latter adds an additional 1-5% price value on top of the market price value of gold. In my opinion, if you’re looking to be profitable and have access to a more liquid gold market, you should purchase a generally circulated coin. Some of the well-circulated gold coins include the American Eagle, the South African Krugerrand, and the Canadia Maple Leaf.


  • Jewelries; if you have ever bought a gold wristwatch, a necklace, or gold chains and have been able to sell it at a price much higher or lower compared to the original price, you have invested in physical gold by chance. This is a more straightforward and simplest way to invest in gold without a third party.

Ibrahim Clouds

Ibrahim Clouds is a writer, award-winning poet and an architect. If he's not found jumping from an online course to another, he's in his favorite spot of meditation, as a yogi and a spiritual teacher. One thing to never forget about him is his love for wealth-creation.

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