How to invest in gold – TOP 5 ways

gold price $10,000istara / Pixabay

Many stocks in early 2020 have reached record valuations. Now maybe time to move some winnings into undervalued Au. Here are a few ways to invest in gold with deeper insights on gold bullion buying. Are you thinking about investing some funds into gold as an alternative or potential hedge to stocks, bonds, real estate, and fiat currency values? We made the following video for interested clients and ValueWalk readers regarding gold investment fundamental drivers. As one of the largest physical gold bullion dealers in the United States, it is our duty to educate our SD Bullion customers about gold and other precious metals. Below we break down the current top five most common ways gold investors invest in gold, and how they often attempt to gain exposure to the generally escalating gold spot price.

Gold buying and selling guide

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Q4 2019 hedge fund letters, conferences and more

 

 

Following this breakdown, check out our further insights on gold bullion buying and selling.

Which gold bullion coins are most often purchased and why.

The trend for the fully fiat denominated gold price is clear, devaluing versus gold is inherent to the current design of our full fiat monetary system (1968 - 2016 data proves that having a prudent position gold allocation in bullion makes common sense).

GSP

How to Invest in spot gold price?

Top 5 Ways to

Invest in Gold

(objective dependent)

PROs CONs Examples
Gold Bullion
  • Direct Tangible Ownership & Gold Price Exposure
  • Potential to Yield Premiums Above the Gold Spot Price (i.e. fall 2008 for AGEs)
  • Bid-Ask Spread or the cost between buying and selling (2-5%) makes this a longer-term trade.
  • Precautions required against theft or confiscation
  • Non-Bank Storage Fees
    <30 basis pts.
  • American Gold Eagle coins
  • Canadian Gold Maple Leaf coins
  • South African Krugerrand Gold coins
  • Gold bullion bars ranging in size from 1 gram to 1 kilo
Gold Jewelry
  • Direct Tangible Ownership You Can Wear and Showoff plus Gold Price Exposure
  • Not homogenous and often not 24k so valuations can be tricky
  • Easier to transport on the body, bypass customs

 

  • Larger Bid-Ask Spread or the cost between buying and selling (10-30% if you know where to shop)
  • Risk of Theft
  • Finding reasonable dealer Bid-Ask prices locally can be difficult
  • 24k gold jewelry is
    .999 fine
  • 22k gold jewelry is
    .916 fine
  • 18k gold jewelry is
    .750 fine
  • 14k gold jewelry is
    .583 fine
Gold ETFs
  • A low-cost way to gain price exposure to the dynamic gold spot price
  • Easy to trade in and out of with a lower Bid-Ask Spread than bullion
  • Retail Gold ETF shareholders own no gold bullion and are merely unsecured creditors
  • Fees typically range from 25 to 40 basis points per year. Computes to $250 to $400 per $100K per annum.
  • No or little premium appreciation potential versus gold bullion coins during market shortages (e.g. 2008)
  • GLD the largest gold ETF by market share charges shareholders 0.40% per year.
  • IAU the next largest gold ETF by market share charges shareholders 0.25% per year.

 

 

Gold Mining Shares
  • A potentially leveraged play to the gold spot price
  • Usually tracks the gold spot price and can outperform the gold spot price
  • Can and often do go bankrupt, have mining shaft risks, & can also get nationalized by local governments
  • Can and do at times underperform gold spot price action
  • Many gold mining companies dilute shareholder performance by issuing more shares over time
  • Barrick Gold (NYSE: ABX)
  • Goldcorp (NYSE: GG)
  • Newmont Goldcorp (NYSE: NEM)
  • Anglogold Ashanti (NYSE: AU)
Gold Futures (COMEX)
  • Leverage allows for a speculator to control more derivative gold than their cash could in real physical gold bullion
  • High liquidity with a deep two-way low Bid-Ask spread market
  • Indirect exposure to gold bullion
  • Costs to taking delivery of random COMEX approved gold bullion product hallmarks
  • Gold futures contracts are time-limited
  • Speculating against deeper-pocketed professional traders and commercial banks some of whom are under current indictment by the US DoJ

 

  • COMEX gold futures contracts represent 100 oz of gold
  • Mini-gold futures contracts represent 50 oz of gold
  • COMEX kilo futures contracts represent 32.15 troy oz of gold

 

Gold Streaming Companies
  • Diversification
  • Potential upside from gold mine development
  • Price typically tracks the gold spot price
  • Consistently wide profit margins

 

  • Indirect gold price exposure which may or may not underperform the gold price
  • Mine operational risks inherent (shaft, nationalization threats, pollution shutdowns, etc.)
  • Often other commodities or metals are streamed aside from gold (i.e. copper)

 

  • Wheaton Precious Metals (NYSE: WPM)
  • Royal Gold (NASDAQ: RGLD)
  • Franco Nevada  (NYSE: FNV)

 

Gold Bullion Investments Are Near 40% of All Physical Gold Holdings

Government central banks are currently buying gold bullion at a pace not before seen since their last publicly acknowledged and fully admitted gold price rigging scheme fell apart. They know that when their fiat currency issuance ultimately fails they will need gold bullion reserves to return credibility to their next monetary schemes.

The world’s ‘man on the street’ gold bullion buyer has been buying millions of ounces of gold coins and gold bullion bars since the London Gold Pool failed its near decade long $35 oz price rigging scheme (1968).

It was during this same timeframe that the world’s largest gold bullion supplying nation of all time, South Africa, debuted its iconic 1 oz gold Krugerrand coin.

The following video will give you some insight into the heritage of this still very famous and purchased gold bullion coin brand.

Gold bullion buyers who prefer to pay less fiat currency price premiums over the fluctuating gold spot price often choose to buy gold bullion bars instead of government-issued sovereign gold bullion coins.

The following video breaks down popular gold bullion bar mints including PAMP Suisse, the Royal Canadian Mint, the world’s largest gold refinery the Valcambi Mint, Sunshine Minting, Istanbul Gold Refinery, and others.

Today in this 21st gold bullion bull market ongoing, the world’s now most often purchased gold bullion coin by sales volume is the American Gold Eagle Coin.

The following short video will give readers a better understanding as to why this gold bullion coin remains so popular amongst US and global bullion buyers.

Spot gold price exposure via American eagle Coins

At the 1:14 moment mark in the short clip above, we mention how American Gold Eagle coins are both almost universally bought and sold with both bid and ask prices above the fluctuating gold spot price.

The following chart reflects American Gold Eagle coin premiums on eBay over the last 12 years of time. Note how during the fall of 2008, while the gold bullion industry was inundated with demand and lacking silver and gold bullion supplies for immediate delivery, the price premiums on American Gold Eagles jacked up near +25% on average over the then gold spot price.

While in late 2008 the derivative-driven gold spot price was then volatile, trading around $800 oz and even near hundred bucks below. At the same time, many gold bullion buyers were paying roughly $1,000 per one troy ounce American Gold Eagle coin.

During normal calmer trading time frames, these official 22k gold bullion coins supplied by the US Mint trade from 2 to 10% over spot depending on volumes bullion buyers are acquiring and too, the then market conditions

 

gold spot price

This chart’s spike in black in late 2008 (on the left-hand side) is both a reflection of the derivative financialized price discovery system not reflecting physical reality (one which is still most often in place), the fact that dozens of retail savings and commercial banks across the US had and were failing, and the lack of ready to deliver gold bullion supplies versus multi-fold demand at that time.

Having worked through that 2008 bullion shortage era, we know we are only another financial crisis away from seeing something akin to this again.

Gold Investing How To Bottom Line

If we consider the current historic and bubble-like valuations for many stocks, bonds, fiat currencies, real estate markets. If you are looking for value, we suggest searching non-commodity or precious metal markets.

Gold bullion is not only the safe-haven asset of most government central banks globally, but we also suggest it should be so for most investor portfolios worldwide. We expect once the fiat Federal Reserve note price paces $2k oz the mania for gold will begin in earnest.

gold spot price

Speculate in derivatives and leverage bets only with what savings you can afford to fully lose.

Acquire in gold bullion the savings which you intend to keep for the long term.



About the Author

James Anderson
A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. Given that repressed commodity values are now near 100-year low-level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now before more unfunded promises debase away in the coming decades.