Sunday, January 20, 2008

How To Invest In Gold

How To Invest In GoldHow To Invest In Gold.

Lots of new investors want to know how to invest in gold, especially with the recent resources boom on the Australian stock market. In this post I will discuss some of the methods available to investors who don't currently have exposure to gold, and who want to learn how to invest in gold.

Before we get started, I just want to make it perfectly clear that this article is about how to invest in gold. I'm not making any recommendations as to whether now is a good time to invest in gold. With gold currently trading at over $1,000 per ounce, it is certainly a long way from it's low point, but who knows how much higher it can go?

Invest In Gold Producing Companies.

There are many gold producing companies listed on the Australian Stock Market, not to mention a plethora of junior explorers if you are looking for a more speculative investment in gold. Buying a gold producer will give you exposure to rising gold prices as well as any upside in the specific company. This may include exploration potential and efficiency gains.

The downside to investing directly in gold producing companies is the company specific risk you will take on. An individual company may underperform the gold price for many reasons. In the worst case scenario, insolvency is not out out of the question. Recall Sons Of Gwalia.

A couple of the larger gold producing companies listed on the ASX include:
  • Newcrest Mining Limited (ASX:NCM)
  • Sino Gold Limited (ASX:SGX)

Invest In An ETF.

Investors can gain direct exposure to the price of gold bullion by investing in a gold exchange traded fund. The only gold ETF I know of listed on the ASX trades under the symbol GOLD. Through this vehicle, investors gain beneficial ownership of 1/10th of an ounce of gold bullion for each GOLD share held. Read more about investing in GOLD shares.

Buying an ETF is like buying any other share. They offer liquidity since they are easily traded on the stock market. And if you want to know how to invest in gold with little money, you can investigate the use of leverage with ETF's. Margin lending among other lending products may let you get started with just a small amount of your own money.

Invest In Gold Bullion or Coins.

You can also invest in gold by buying gold directly from gold dealers in Australia. Gold can be bought in a variety of forms including different sized gold bars and coins. Dealers will normally buy at the spot price then charge a commission plus a delivery fee, but there are a few different variations.

Unless you want to want to actually be able to see and touch the gold, ETF's are probably a better option as they will give you the same exposure to the gold price but you don't need to worry about storage and handling.

If you really want to know how to invest in gold coinage, I would suggest you speak directly to a dealer about your specific needs. They will be able to tell you how to invest in gold coins.


TheLocoMono said...

Is that 1K in U.S. dollars or Euros or Aussie dollars? I think the price has fallen since you wrote this but I do have to admit, it is interesting to see how much comfort people have in possessing gold knowing it would always go up in value.

Those Egyptian pharaohs sure knew what they were doing to strike it rich.

spiko said...

Gold is not sure money. There is a high degree of FX risk as the price of gold is pegged to USD

alex said...

You can also buy gold through we sell a range of physical gold.

aussie said...

Thank Alex. I wasn't aware of this service.

Kenneth Vilkin said...

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