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How to Invest in Gold for Beginners

by Davis Porter

The likes of Jeff Bezos, Mark Zuckerberg, and Larry Page might convince you to consider starting an ecommerce business. But, you know who was richer than all of them combined?

His name was King Mansa Musa I. You might know him as the richest person of all time. In fact, legend has it that this Malian emperor was so rich that his wealth is still indescribable. This alone should be reason enough for learning how to invest in gold. 

You see, while his wealth came from many different sources, gold trading was Mansa Musa’s ultimate cash cow. This was back in the 14th century, and as you’ve probably seen from the global markets today, the gold rush has never slowed down. So much so that – get this – gold is now recording the sixth-highest average trading volume per day in the world markets. 

That said, it’s time we showed you how you can get in on the action. After trying out different gold investment methods, we’ve finally come up with the ultimate guide on how to invest in gold for beginners. So, read along to learn the tricks, the real stats, as well as the best ways to invest in gold today. 

3 of The Best Ways To Invest In Gold in 2020 / 2021

1. Buy and Sell Physical Gold

As a beginner who’s trying to learn how to invest in gold, you might want to begin with the basics. We’re talking about the traditional investment option of purchasing and selling gold in its physical form. You can, for instance, buy gold in bullion, coins, or jewelry.

gold bullion bars

Of the three options, however, it’s worth noting that gold bullion is the official standard form across trading markets. It’s fundamentally made from pure investment-grade gold, which is usually molded in the shape of bars and coins. 

In 2019, the bullion traded at an average price of $1,392.60 per troy ounce, which was slightly higher than 2018’s $1,268.49 per troy. The highest it has gone this decade, though, is $1,668.98, which was the average troy ounce price in 2012. 

gold bullion prices

If this sounds like something you might want to try, you can go ahead and purchase gold bullion directly from registered dealers in your area. You can even buy them online after comparing the prices across different dealers, and ensuring the gold has been duly tested and certified. 

In the end, however, you might be required to pay a premium of 3-10% over the gold price. And once you purchase it, you’ll need a bank deposit box or a vault for safe storage of the gold. Or, you can still keep it at home in an underground bunker or probably bury it all in a treasure chest, just like in the movies. The choice is yours. 

2. Trade Gold ETFs and Mutual Funds

Thankfully, gold isn’t always bought and held in its physical form. You can choose to invest in gold-based ETFs or mutual funds. 

ETF refers to Exchange Traded Funds. You can think of them as specialized shares that virtually represent a standard amount of gold, such as one-fifth of an ounce. 

And yes, that’s right – they are typically traded just like regular stocks. That means you can buy and sell them through an IRA or brokerage account. In fact, many of the online brokers allow you to proceed with as little as one gold ETF share. All you need in your account to get started is a few dollars.

stock trading

In other words, this is the best way to invest in gold if you value convenience and cost-effectiveness. It only takes a couple of minutes to open an online brokerage account and voila! You’ll be trading gold ETFs at an annual average expense ratio of about 0.65%

3. Purchase Gold Futures

When you finally learn the ropes on how to invest in gold, you can go ahead and graduate into the big league of gold futures.

That said, gold futures operate a lot like gold ETFs. Each represents a fixed amount of gold. But, instead of trading them in shares, you get to buy and sell the gold in the form of contracts. 

Futures are basically trading contracts that allow you to exchange assets at a certain date in the future. And here’s the twist – their settlement prices are usually stated in the contracts. 

Experienced investors are particularly attracted to gold futures by their low commission amounts and favorable margin requirements. What’s more, gold future contracts grant speculators flexible market positioning. If your prediction is good and the future market prices tip in your favor, you stand to make quite a killing. 

Well, if this arouses your interest, you can get started by opening an account with a certified gold futures broker. They’ll require you to deposit a predetermined minimum investment amount in the form of an initial margin. And once you do, you’ll be free to settle for a “marked-to-market” position, whose returns depend on how the market prices go. 

Over To You – But, Beware!

And there you have it. Clear guidelines on how to invest in gold for beginners. 

But, as you get started, here’s a word of caution. The gold market continues to attract quite a large number of scammers seeking to take advantage of gullible rookies. They rake in millions of dollars a year through fake gold scams, which are usually accompanied by fake but very convincing documentation. 

To avoid falling victim, you might want to do your research and identify the certified gold dealers. When it comes to gold bullion investments, for instance, it’s always advisable to stick with traders approved by the London Bullion Market (LBMA). You’ll find more than 150 options scattered across over 30 countries. 

All in all, though, you should only consider buying gold bullions for financial security in the event of an impending crisis – such as the 2020 Coronavirus Pandemic. Otherwise, gold ETFs are the best under normal conditions, especially if you’re seeking to diversify your investment portfolio. But, if you’re more into speculative investing, you’d be better off with gold futures. 

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