Gold prices have climbed in the past month, and that shouldn’t come as a surprise. With the Fed printing trillions of dollars as it attempts to offset the economic damage brought on by the coronavirus pandemic, investors have sought the safe haven of going to buy gold to protect their wealth.
Since hitting a low around $1480 per ounce back on March 19, gold has climbed to as high as $1740 an ounce recently. This shows a rise of 17.5% in less than a month.
Not bad for an investment that many use as a store of wealth.
The last time the Federal Reserve printed vast sums of money in an attempt to pull the country through an economic slowdown was 2007 through 2011.
Gold was around $650 an ounce for most of 2007, and as the Fed printed more money, gold hit a high of $1900 an ounce in late 2011.
That’s a gain of nearly 200% in a little more than 4 years.
If, like us, you expect the Fed to continue printing money and are looking to buy gold as either a store of wealth or as an investment, here are the different ways you can own the precious metal.
Gold bullion can be bought online or in stores (coin dealers, pawn stores, etc.). It can be acquired in either gold coins or gold bars. Coins are generally easier to transact with due to their wide acceptance and greater liquidity.
Gold coins are referred to as either a “sovereign” coin or a “round.” Sovereign coins are minted by a government and carry an implied guarantee of their face value. The most common sovereign coins are the 1-oz. Canadian Maple Leaf and 1-oz. American Eagle. Other popular coins are the American Buffalo, South African Krugerrands, Austrian Philharmonic and Chinese Panda.
“Rounds” are produced by a private mint and carry no face value. Here in the US, an example would be gold coins produced by the Franklin Mint. These coins are less popular than sovereign coins but still trade fairly easily.
“Numismatic” gold coins are rare coins that aren’t valued on their gold content but rather their rarity and condition. These are typically only bought by collectors as they can trade for significantly more than the spot price of gold based on demand. Unless you plan on becoming a collector, it’s best to avoid buying numismatic coins.
Gold bars are available in both gram and ounce weights, depending on your preference and budget. Nearly all gold bars will be from private mints.
When it comes to investing in gold via the stock market, an investor has a few options. You can buy gold ETFs (exchange-traded funds) that track the price of gold. The benefits include ease of buying and selling as well as liquidity of the market.
The most popular choices are the SPDR Gold Shares ETF (GLD) and iShares Gold Trust (IAU). These two both seek to reflect the price of gold bullion.
You can also invest directly in large gold mining companies like Newmont Corp (NYSE: NEM), Barrick Gold (NYSE: GOLD) or Kinross Gold (NYSE: KGC). Or you can invest in junior mining stocks, which are typically much more speculative and offer a greater risk-reward. Some options here are Eldorado Gold (NYSE: EGO) and Pretium Resources (NYSE: PVG).
Alternatively, you can also buy ETF for gold miners like VanEck Vectors Gold Miners ETF (GDX) or VanEck Vectors Junior Gold Miners (GDXJ).
There are also leveraged ETFs, which offer 2x or 3x the leverage, but we won’t discuss those here.
As we mentioned earlier, with the Federal Reserve printing money at an unprecedented rate, there are plenty of reasons you should have gold in your portfolio. You can use it either as insurance to protect your wealth or as an investment to generate profits. Research the different options and choose the one that best fits your investment goals.