Strategies for Purchasing Gold

by Celeste Zimmerman
The purchase of gold jewelry can be part of an investment strategy.

The purchase of gold jewelry can be part of an investment strategy.

Gold carries a certain mystique. From the opulent display of ancient Egyptian icons, to minting of gold coins with a ruler's face, to hoarding of bullion in times of economic uncertainty, gold has always held a special place. And all gold that has been mined is still in existence today. Investing in gold is a risk management strategy that offers insurance to you against extreme movements in value of other asset classes in your portfolio.

Coins, Bars, Bullion, and Jewelry

Precious metals investors' purchases may include gold coins and gold bullion.

Physical ownership of gold -- purchased from a reputable deal -- is one strategy. A 5 percent commission over spot price is to be expected for bullion, coins, and bars. Numismatic pieces of gold will carry higher price tags. Secure storage and insurance is required. Safe deposit boxes aren't insured, and any home storage will need a special insurance rider. Gold can function as currency in a disaster scenario and provides protection against currency debasement.

Gold Mining Stocks

You can own a piece of a company that mines for gold by buying its stock. This allows you to participate in the profits (and possibly losses) of the company. The company's shares will most likely fluctuate in price based upon the price of gold. Check with your investment adviser or stock broker, and do research on your own. Investing in these types of stocks can provide an element of diversity for your portfolio.

Exchange-Traded Funds

Exchange-traded funds -- as the name indicates -- are traded on stock exchanges. Some ETFs and exchange-traded products are backed by gold. The funds are traded like stocks, in that you can purchase them online or through your stock broker. Their value will follow spot gold prices. This investment strategy will provide the investor an opportunity to participate in the price change in gold.

Gold Certificates

Gold certificates represent gold that can be claimed by turning in the certificate. Commissions, storage fees and insurance costs are connected with owning these certificates. Some are "pooled" accounts, in which your gold is pooled with that of other investors. Certificates provide a good option to the ownership of gold.

About the Author

Celeste Zimmerman has written professionally as a CPA in the Denver area since 1981. She has a BS in Accounting from the University of Colorado in Boulder. She obtained her Certified Public Accountant Certificate in Colorado. In addition, she became a Professional Mediator in 2012.

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