Gold is a time-tested safe haven investment that usually attracts the attention of investors during an economic downturn.
While the traditional approach has been to buy physical gold and wait for its value to increase, nowadays you have more options to make money with the yellow metal.
Here are four ways to make money with gold.
Invest in gold mining stocks
If you believe in gold as well as the stock market, you can get the best of both the worlds by buying the shares of leading gold mining companies listed on the stock market.
The strategic investing advantage in this case is that if for some reason gold prices start declining, you could still make money because the mining company might redirect its resources and expertise towards another metal.
The limitation of owning gold stocks is that a macro economy led stock market decline could cause the price of your stock to fall, even when the value of physical gold is holding steady or rising.
Investing in gold stocks is different from investing in gold also because the skills, integrity, and financial strength of the mining company will influence the stock price over time.
Buy into gold ETFs
Gold exchange traded funds (ETFs) allow you to diversify your risk rather than putting your money into just one gold mining stock.
Gold ETFs deploy a large pool of investor funds into different gold mining companies. ETFs can be traded on the stock exchange just like any other stock.
GDX, GLD and GDXJ are some of the well-known gold miner ETF tickers you may consider.
Like any other ETF or mutual fund, gold ETFs will charge a small fee to manage the fund. But it’s often worth the cost, especially if you have no time or skill to research and invest in individual gold stocks on your own.
It’s noteworthy that even though buying into a gold miner ETF will spread your risk, its price is still subject to stock market fluctuations.
So, the value of your investment could increase or decrease even when there is no change in the market price of gold.
Trade gold futures
Gold futures are a complex financial contract where you agree to take delivery of a specified amount of gold from the seller at predetermined price on a future date.
If the price of gold rises at the future delivery date, you will make a profit as a buyer of a futures contract. But if the gold price falls by the future delivery date, the seller will make a profit and you will make a loss.
Gold futures contracts generally require a minimum order of 100 oz. of gold.
Futures contracts often involve a high amount of leverage, and you should only consider trading in futures if you have a thorough understanding of the markets and adequate trading experience.
Purchase gold coins or bullion
The simplest way to make money with gold is to buy and store gold coins, bars, or jewelry.
While future gold prices are nearly impossible to predict, historical trends show that the value of gold increases over a long period of time.
Some people prefer to own physical gold as a hedge against unforeseen economic calamities, where the financial systems may come under a threat.
You could also purchase the precious metal through a gold IRA account as part of your retirement plan. In a gold IRA, a broker or special custodian will store the gold on your behalf.