How2Invest In Gold- A Guide For Beginners

By BullEyes 6 Min Read

Some people might view gold as an ornamental object for its aesthetic appeal. But the perspective changes with each person’s mindset. Business-minded persons may consider gold as a source of investment to earn money, and they understand the real value of gold. 

Gold is the most precious and valuable metal that is historically used as a money alternative. Yet now, gold is not devalued, nowadays, the amount of gold a country owns decides its role in economic stability. 

Now the question arises, How2invest in Gold as a beginner when you don’t know about the Gold market? 

This blog post will give all the information about investing your money in gold with all methods and explanations.

How2Invest in Gold Using These 3 Ways

You can invest in gold using these 3 ways: Physical Gold, Gold ETFs/funds, and Gold futures/options. Let us know the process with the pros and cons of each method

Buying Physical Gold Biscuits, and Bars

Many investors opt for the classical method to invest in gold – they buy gold in the form of bars, biscuits, coins, or bricks. Having physical gold not only creates a sense of happiness but also makes us feel richer. This tangible asset can comfort your worries in times of inflation. 

To buy physical bullion, always choose a reputable gold seller to avoid being deceived by impure gold. 

Always buy gold that is 99.5% pure. 

Consider purchasing gold bars known for their purity and minimal or no collector charges.

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Pros

  • Inflation Control
  • Physical gold provides more safety sense than digital gold
  • Easily tradable

Cons

  • Additional costs of storing, trust issues, safety issues, and insurance costs,
  • Higher premium
  • A gold bar itself doesn’t generate money until you sell it after its price goes high

Gold Exchange-Traded Funds (ETFs)

Another way to invest in gold is Gold Exchange-Traded Funds (ETFs). In ETTs, investments from multiple individuals based on their share (percentage) are invested in bullion or gold-related assets to trade on stock exchanges. This provides you with the convenience of buying and selling similar to stocks.

In ETFs gold price is tracked. Sometimes funds are used to purchase actual gold bars, meaning you are buying a share of that physical bullion. 

Other funds invest in gold-related assets – companies digging for the gold, or in companies promising to provide gold ownership in future. 

Either way, you are making a profit, and your portfolio is diversified to reduce the risks. 

Funds charge a small percentage for managing your investment and also deduct taxes on profits from selling your shares.

Pros

  • Easy access to gold investment
  • Low transaction costs than physical gold
  • Provides high liquidity

Cons 

  • The company may refuse to pay if it goes bankrupt
  • Managing charges often reduce your profits

Gold Futures/Options

Gold futures are a way to bet future prices of gold without actually buying the gold itself. 

You have agreed on a deal to purchase gold at a specific price in the future. For example, agreeing on buying gold after 6 months at today’s price. You can make a significant profit if the price rises after 6 months, but you could also incur substantial losses if the gold price declines. 

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With options, you have the choice to buy or sell gold at a predetermined price within a specified timeframe. For that choice, you are charged an option premium. Now you made a deal to buy gold after 3 months on today’s price, guessing that it will go high. After 3 months, you have the freedom to buy gold, if the price of gold today is greater than 3 months before. 

Alternatively, you can let the option expire if the current gold price is significantly lower than it was three months ago.

Gold futures and options seem to be the same, but in futures, you must buy the gold, even if you are losing your money, but in options, you have a choice because you pay the Option premium.

Pros

  • The potential for high returns
  • Used to hedge gold price fluctuation
  • Small investments manage large amounts of gold

Cons

  • Options premium (money) is charged in case of options
  • You should buy if you are losing ( in gold futures)

Conclusion

For beginners, we recommend investing in Gold ETFs to avoid the complexities of purchasing physical gold. The Gold ETFs provide benefits – buying gold shares in an easy way, charging low transaction fees, and providing more profitability. This method of investing in gold is a good startup for beginners to get exposure to the gold market.

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