Gold continues to fascinate Americans, as illustrated by the recent flashy sale of a six-pound nugget. A prominent San Francisco Bay Area collector bought what is believed to be the biggest gold nugget found in modern times in California’s historic Gold Country on Friday for about $400,000.
Many investors, however, are finding other ways to pan for gold. This is always a personal choice depending on each investor’s portfolio, but given the strong dollar of late, the lower-priced soft yellow metal has held even greater allure.
Advisors often recommend that a diversified portfolio include some commodities, and many investors find it hard to resist the glimmer – and the perceived safety – of gold as a hedge against inflation. Like any other investment, the tricky part is to buy low.
A strengthening dollar and relatively positive U.S. economic data have caused the price of gold to fall in recent months. It reached a nine-month low at the end of September at $1,207 an ounce. On Monday it’s been hovering around $1,228 an ounce.
While there’s still a chance its price could fall a little further this year, retail investors typically buy the precious metal for the long run. Many experts believe that with the price of gold so low right now from a historical standpoint – gold prices crossed the $1,900 mark in August 2011, its highest level ever – now may be a good time to buy.
“Gold is an insurance policy,” said Ed Moy, chief strategist at Fortress Gold Group and director of the U.S. Mint from 2006 to 2011. “Demand for gold typically goes up if people sense there’s a bottom to the pricing or when the price of gold starts to increase and people panic and feel they’ve missed the ride.” He noted that sales of gold coins more than doubled in September.
If you decide to add gold to your portfolio (and it’s worth, as always, consulting with a financial advisor or other trusted professional), here are three ways to invest:
You can buy physical gold. Whether you decide to buy gold in the shape of coins or bars, this is the most direct and perhaps easiest way to invest in the precious metal, especially if you’re only considering investing a small amount. The downside to this method? You’ll need to find a way to store your gold, either at home or in your bank’s vault.
You can invest in the shares of a company that mines gold. “As long as the price of gold increases, gold-mining firms are likely to show higher profits,” noted financial strategist William Storum in a release promoting his book, Going for the Gold. The downside is that you’ll be exposed to market swings independent of gold prices.
You can invest in a gold exchange-traded fund. This option has the advantage of allowing investors to enjoy the benefits of owning gold without the added costs and logistics of physical ownership. Owning gold through an ETF is for the more seasoned investors and those wanting to invest larger amounts, since ETFs can only be bought and sold via a brokerage account.
“Most individuals go toward owning the physical gold,” said Moy. “If you’re really rich, you go for ETFs because you don’t have to worry about the logistics of storing a big gold bar.”
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