But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value. To spread out your risk and diversification beyond individual gold mining stocks, you can look to a fund that holds a basket of them. One good example is VanEck Vectors Gold Miners ETF , which has produced one-year returns of 14% and a five-year annual average of 8.9%. Beyond Newmont and Barrick, its top holdings include names like Franco-Nevada, Agnico Eagle Mines, and Wheaton Precious Metals. ETFs “are the easiest way for investors to gain exposure to gold,” says Jon Mills, an Australia-based equity analyst who covers the sector for fund-research firm Morningstar. Due to gold bullion’s high price, it’s especially important to use a reputable dealer and to pay for delivery—with insurance—or to shell out for storage at a large vault or in a safe deposit box.
But purchasing these isn’t necessarily as easy as clicking a button to buy ETF shares. Since 1971, returns have been similar to equities and outperformed bonds, according to data from the trade group World Gold Council. In general, look for what’s known as gold’s spot price, which is the price at which buyers and sellers are willing to trade gold on any given day, as opposed to some future date.
Where Does Gold Occur?
You might start with jewelers who are members of the Jewelers of America and have signed a code of professional conduct requiring them to be honest and forthcoming about the nature of their pieces. You can buy gold coins through dealers, pawnshops and individual sellers that you trust. If you choose to buy your gold coins online, make sure to go through a dealer listed in the U.S. Whether you buy your gold coins in-person or online, you don’t want to waste money on forgeries or gold that’s less pure than you’re led to believe. A one-ounce American Eagle coin, for instance, is only 91.67% gold. In fact, the coin weighs 1.1 ounces, approximately one ounce of which is pure gold; the rest of the weight is silver and copper.
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Gold mutual funds and ETFs are a good choice for beginning investors because of their low cost and low minimum investment requirements. The largest gold mining companies boast extensive global operations; therefore, business factors common to many other large companies play into the success of such an investment.
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It can be difficult to liquidate if you don’t have a local gold buyer. Most insurance companies will not cover precious metals stored at home. Generally, gold stocks rise and fall faster than the price of gold itself. Individual companies are also subject to problems unrelated to bullion prices—such as political factors or environmental concerns. So investing in an ETF that owns gold stocks is a higher-risk way to play, but it does offer appreciation potential—which investing in bullion does not. Before purchasing physical gold or investing in gold-backed securities, make sure it fits with your investment strategy, financial goals and risk tolerance. Gold is considered a safe-haven asset because when prices for other investments — like stocks or real estate — drop sharply, gold historically retains its value.