From Bar to Bullion: The Best Ways to Invest in Gold
From Bar to Bullion: The Best Ways to Invest in Gold

From Bar to Bullion: The Best Ways to Invest in Gold

It's easier now than ever to invest in gold. Some of the best ways to buy and sell gold include gold ETFs, gold mining stocks, and gold investing apps.

Commodities & Gold

Commodities & Gold

Stock Trading

Stock Trading

Global Markets

Global Markets

Gold is considered one of the best commodities to invest in, and for good reason. It can help keep your portfolio afloat during market downturns or shield you from crypto losses. It also acts as a great hedge against inflation, preserving the value of your assets as prices go up.

However, gold might not seem like the most accessible investment, particularly if you're used to staying traditional with stocks and bonds.

Arguably offering the best of both worlds, new gold investing apps have combined the diversification benefits of investing directly in physical gold with the ease, convenience, and low barrier to entry of gold ETFs and stocks.

It's often seen as a safe asset for protecting wealth from inflation, so it may be a good option to allocate a small portion of your portfolio to gold if you want to err on the side of preservation.

There are many different ways to invest in gold, and while some involve buying physical gold, you can also add this precious metal to your portfolio by buying gold exchange-traded funds (ETF) or stocks and even using a gold investing app. Here are all the best ways to invest in gold.

Buy physical gold

  • Gold Bullion (gold bars)
  • Gold Coins
  • Gold Jewelry

You can invest in physical gold by purchasing gold bullions, gold coins, or gold jewelry. Although, Vaulted CEO David McAlvany doesn't see gold jewelry as a particularly cost-effective way to invest in gold. "You might consider [gold jewelry] a form of investment in gold," says McAlvany, "but generally, I don't because the premiums you pay on that are so high."

Investing in gold coins or bullion is more complicated than, say, purchasing shares of a stock or ETF. You'll often need to work with a gold dealer and pay for additional costs like transportation, storage, and insurance when purchasing gold bullion. You could go the DIY route and store it in a safe deposit box for under $200 per year, but you'll likely still need an insurance policy as most home insurance policies don't cover gold. What's more, physical gold investments aren't very liquid—it could take a while to sell your gold for cash.

That said, physical gold does have its advantages. For one, gold coins and bullions are much less susceptible to market downturns than gold securities like stocks and ETFs, which are more likely to correlate with the S&P 500. This means that physical gold is one of the best ways to invest in gold if you're looking for a recession-resistant asset that can hedge against inflation.

Gold ETFs

Gold ETFs are the easiest way to gain exposure to a diversified portfolio of gold bars and gold mining companies on the stock market. While gold ETFs offer much in the way of convenience, they may be lacking when it comes to transparency, according to Noble Gold president Collin Plume.

"There's no way to know with an ETF how much gold and silver that fund has," Plume explains. "So you're always held to making sure that ETF is doing the right thing." For example, during the pandemic, demand for gold and silver increased so much that it was nearly impossible to obtain—yet, precious metals ETFs were selling at record numbers. Plume speculates that these ETFs may have not been fully backed by gold and silver reserves at the time, which is a cause for concern for many investors who want to know exactly where their money is going.

Gold ETFs are one of the quickest and most popular ways to invest in gold. You can open a brokerage account with platforms like Public, Stash, or M1, fund your account, and buy gold ETFs with the click of a few buttons. Gold ETFs track the price of gold and behave much like individual stocks. Not only is this a much more liquid investment than buying physical gold, but it typically also comes with very low minimum investment requirements.

Gold stocks

Like gold ETFs, gold stocks provide investors with an easy way to add a highly liquid gold investment to their stock market portfolios. Gold stocks are shares in a gold mining company and their value is dependent upon the gold mining market. While they typically track the price of gold, some gold mining companies may continue to be profitable even when the price of gold is down and vice-versa.

As such, you'll want to consider the performance of a gold mining company in addition to the overall gold market when investing. Some gold mining companies even offer decent dividends, which makes them one of the best ways for investors to gain exposure to gold while earning passive income. The downside of a gold mining company is their exposure to the broader precious metals market, which means their stock price is often impacted by macroeconomic factors like supply chains and fuel prices.

Gold futures

Another way to invest in gold is by purchasing gold futures contracts, although it's also the riskiest. A gold futures contracts are the right to buy (or sell) physical gold at a set price on a certain date, regardless of what the spot or market price might be. Buying gold futures is basically betting on gold prices going up or down within a set timeframe, but this is much riskier than simply buying a gold bullion to sell for a higher price down the road.

Before investing in futures contracts, you want to build a futures trading strategy, develop an understanding of concepts like backwardation and contango, and find the best futures trading platforms to execute your strategy. Futures are great for hedging against risk on the stock market or betting on price action, but they're an inherently riskier way to invest in gold.