There are several possibilities to invest in gold, and first you should take into account the following factors:
- Gold is quoted in dollars, so anyone who invests in this raw material is immediately exposed to exchange rate risk.
- The troy ounce is the unit of measurement. It corresponds to 31.1035 grams.
- Gold is traded on a number of stock exchanges, notably the Comex (United States), London Stock Exchange (United Kingdom) and Shanghai Futures Exchange (China).
- The raw material is traded on the futures market (for delivery on a predetermined date) and also on the spot market ( for immediate entry). Quotations can be consulted on the websites of the specialty and on the exchanges where it is traded.
- The World Gold Council website is one of the best sources to learn more about gold.
Physical Purchase
If you want to invest in oil, you’re not going to buy a barrel of crude oil. The same goes for most “commodities”. But in the case of gold, this is not the case, and this is yet another of the distinguishing factors of this precious metal. Buying bars, coins, jewelery or other products with gold is one of the ways to invest, but not the most conventional . It may make sense in terms of long-term investment and preservation of value, but it is exposed to some risks, such as theft, lower liquidity, potential depreciation, etc.
The fever of gold stores has already subsided in Portugal, but there are several spaces for the physical purchase of this product. In addition, obviously, to jewelers and goldsmiths. If you buy a jewel, bear in mind that you will pay VAT, which you will not be able to recover if you sell it.
Purchasing Directly From The Exchanges
Being listed on several stock exchanges, it is possible to invest directly in this raw material. You can buy and sell on the spotmarket , or through futures on the raw material. Note that this market is aimed at professional investors , so you have to resort to a financial intermediary.
Investing Through ETF
Exchange Traded Funds (ETFs) are passively managed investment funds, that is, they replicate the performance of an index or asset. For example, if you want to invest in the US stock market, it is easier to buy an ETF of the Dow Jones or the S&P500, compared to buying some shares of these indices. For raw materials it is the same thing.
If you want to be 100% exposed to changes in the price of gold, there are many ETFs on the market that guarantee this option . If you want to bet on the devaluation of gold, there are also ETFs that appreciate with falling prices. Commissions are usually lower, and as ETFs are quoted on the exchange, you can follow the daily performance of the product.
Investment Funds Are An Option
There are also specialized investment funds , which can invest directly in the raw material (spot or futures market), sector companies and other forms of exposure to the precious metal. They can also invest in other precious metals such as silver and platinum.
In this case, management is active, that is, the professionals who manage the fund have a specific strategy, which you should be aware of before investing . Commissions are usually higher and funds are exposed to variations that can be very different from the gold price.
Stock Purchase
An indirect way of exposing yourself to the price of gold is to buy shares in companies linked to the sector, such as mining companies and raw material traders . Bond prices tend to vary depending on the price of gold, but you will also be exposed to specific aspects of each company, which can be positive or negative.
One of the advantages is the possibility of receiving dividends over the investment period, since these companies usually remunerate shareholders. There are also indices of companies that mine for gold, so you can invest through an ETF.
Leverage With CFD
As with other assets, it is also possible to leverage investment in gold. A very risky strategy that can result in a complete loss of capital, very high losses or sharp gains .
Contracts for difference are among the most popular, registering variations far above the fluctuation of the underlying asset. These are not recommended products for retail investors and for those who want to invest their savings in a long-term perspective. In the range of complex financial products , there are also warrants and other derivatives.
If you intend to invest in gold and do not have advanced knowledge, the easiest way is to buy an ETF , being exposed to the real variation of the yellow metal and with a lower commission. Talk to your bank first to find out what options are available to you.
