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.
Updated Sep 17, 2022
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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.
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Buy physical 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 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.
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.
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.
If you're into crypto, you may want to consider investing in gold on the blockchain. Most investors are familiar with stablecoins—tokens representing an underlying asset like fiat currency—but not everyone knows that some stablecoins are tied to commodities like gold. Though gold stablecoins inherit the risks of blockchain and aren't held to the same standards as gold ETFs, they offer convenient exposure to gold prices with an asset that doesn't have the physical limitations of gold and is easily transferred.
Gold investing apps
Gold investing apps
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. While this way of buying gold is relatively new, especially for everyday investors, gold investing platforms are the best way to invest in gold if you want a direct investment without all the hassle.
Platforms like Vaulted and OneGold let you buy gold with the click of a few buttons and as little as $1—and you don't have to worry about costly logistics like storage and insurance because they take care of those things.
For example, gold purchases through Vaulted are allocated to specific gold bars, and you can even see the serial number of the gold bar(s) you're invested in on their app. If the price of gold goes up, so does the value of your investment. Plus, you can sell your gold investment at any time.
With OneGold, you invest in digital assets that are fully backed 1:1 by gold, silver, and platinum. The value of your investment appreciates if the price of precious metals goes up, and you can sell at any time.
Is gold a good investment in 2022?
Is gold a good investment in 2022?
Whether or not you should invest in gold in 2022 comes down to your particular investment goals and financial needs. Gold is 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.
That said, some investors use gold as a tool for growth by attempting to purchase it when the price of gold is undervalued or expected to rise. No one can say for sure where the price of gold will go in the next year and beyond.
Gold did underperform during the latter half of 2021, so some experts are predicting the price of gold will rise significantly in 2022. And indeed, the price of gold soared during the first few months of 2022, surpassing early-2021 levels. That said, whether the price of gold is just beginning its ascent or is set to take another hit later in the year remains to be seen.