There are various methods of investing in gold through your brokerage account, including purchasing physical bullion or investing in gold-related exchange-traded funds (ETFs). Before opening an investment account, carefully consider your goals and risk tolerance before opening an investment account.
Note that when opening a margin account, your brokerage may perform a credit check on you.
Buying Physical Gold
Gold has historically served as a safe haven asset during times of economic and geopolitical unpredictability, and has appreciated in value against currencies, including the U.S. dollar.
One can invest in gold through various strategies, from purchasing physical bullion bars and coins from trusted dealers or online platforms, to investing in gold-leveraged securities such as ETFs, mutual funds or futures contracts. Each approach may suit you according to your investment strategy, expertise level and risk tolerance level – choose what’s most suitable based on those considerations.
If you want to gain exposure to the gold market without owning physical metal, consider investing in an exchange-traded fund (ETF), which holds physical gold in a vault and trades like stocks on an exchange. Unlike physical gold, ETFs do not incur management fees and can be sold anytime without penalty. Buying gold futures contracts through your brokerage account also gives you access to speculation on gold prices by placing buy or sell orders with other investors; however these complex investments carry higher levels of risk so are best left for more experienced traders.
Investing in Gold-Related Securities
Interested in investing in gold but don’t have time to monitor its price closely? There are still other ways you can invest in it; exchange-traded funds (ETFs) or mutual funds that track gold prices are an alternative way to do it.
Trading precious metal futures or options contracts is an easy and illiquid way to gain exposure to the gold market, providing a way for you to purchase or sell specific amounts at future dates and prices. These contracts give you the right or obligation to buy/sell an agreed quantity at specified dates at an agreed price.
Another investment option is purchasing shares of companies that mine or manufacture gold products, providing diversification as well as certain legal protections. But these investments tend to yield lower returns than owning physical metals; and finding buyers at fair prices for your shares may prove challenging if selling through pawn shops.
Buying Gold Futures or Options Contracts
Gold futures or options contracts give investors the right to buy or sell physical gold on an exchange at a specified future date, following price movements in gold markets and providing an efficient way of participating in market changes while tracking price movements; these instruments offer efficient participation but require high levels of leverage; therefore they may not suit every investor.
One futures contract of gold covers 100 troy ounces, or approximately $60,000 in dollar value, though actual cost could be less due to margin payments of a percentage of futures contract value as down payments or margin payments.
As prices fall, margin accounts must be replenished to prevent being forced to sell your position and therefore, futures trading is typically restricted to larger funds, trading firms and wealthy individuals.
Buying Gold Stocks
Gold stocks (shares of companies that mine and trade gold) offer investors more direct exposure to its price without needing to store physical gold at home or pay storage fees at specialized companies. But these stocks may not move in tandem with gold bullion prices on commodities markets and require further analysis by investors.
Investors in gold stocks face all of the risks associated with investing in the stock market, including volatility and operational risk (which refers to companies successfully exploiting and selling their gold reserves). Furthermore, some investors such as legendary investor Warren Buffett may opt out altogether and focus on cash-flowing businesses which can withstand stock market swings more readily. No matter your strategy for investing, it’s crucial to identify whether gold investing is right for you; NerdWallet’s free portfolio tool can assist with this decision process.
