When it comes to investing in gold, there are a number of different options available. An investor can purchase coins or bullion, or invest in the companies that do the actual mining. An individual can also invest in gold futures. Each investment strategy in gold comes with its own set of advantages and disadvantages. Investing in gold has become popular due to the recent instability in the stock market. Historically, gold has represented an excellent investment opportunity since it has continued to rise in value on a predictable and consistent basis. That is not to say, however, that investing in gold is a sure thing.
Investing in traditional gold, in the form of coins or bullion, is probably what comes to mind for most people when they think of this type of investment. Purchasing gold bullion coins is a common form of gold investment and they are often sold at the spot price plus whatever premium the vendor thinks they can get. Depending on the rarity of the coin, the markup may range from 10% up to 50% over the actual value of the gold. Rare coins can cost as much as double the actual gold value of the coin. Rare coins are often sold at high premiums because investors believe that their rarity ensures their value will continue to climb.
A less common form of gold investing involves placing money in shares of the companies that are doing the actual mining. With investing in a gold mining company an investor should follow the same rules that would apply to any other purchase of company stock. It is important to research the company to determine whether or not it is financially stable. An investor should also keep careful watch so that the stock can be sold in the event of a downturn. Additionally, the value of a gold mining company’s stock will not necessarily be reflected in the price of gold.
Investing in gold futures is one of the riskiest forms of gold investing. Gold futures are similar to other futures markets in that gold prices are locked in so that producers and users are not negatively affected by future fluctuations. Investing in futures basically boils down to an investor making an educated guess regarding the future of gold prices. The benefits to investing in gold futures are that a good investment can represent a huge cash reward, but judging the market incorrectly can quickly lead to disaster.