There are many ways to buy gold and silver. You can buy gold and silver coins, which are solid and portable, but may be a relatively costly way to proceed.
Many ETFs, exchange-traded funds, provide another way to buy gold and silver. These funds are liquid, meaning easy to buy or sell at a price close to the last price. Different ETFs offer varied investing approaches.
Shares of individual gold and silver miners are a volatile way to purchase precious metals.
Jewelry is a delightful way to buy gold and silver. However, jewelry may not be an appreciating asset, even if the salesperson calls an item an “investment piece.”
Gold and Silver Coins
The U.S., Canada, and South Africa, among others, make and sell gold and silver coins. These coins are portable and fungible. To investors, fungible means that if they know the price of one coin, they know the price of each one like it.
However, when you buy a coin, you are paying a premium over the actual price of gold. Whatever happens to metals prices, you probably won’t get all the premium back when you sell. Also, you must protect your coins. A safety deposit box is fine, but home storage is not, unless you make special arrangements. Finally, you will get no current return on money tied up in coins. Watch out for sharp dealing when you buy and sell gold and silver.
For many people, coins are a clunky investment.
Exchange Traded Funds are a more efficient way to buy gold and silver, assuming you believe in financial markets and the potential of precious metals. Transactions are quick. Costs are minimal too, because ETFs are generally lightly managed, and tend to buy and hold. Like almost anything else, you can buy ETFs over the internet. They‘re sold on major stock exchanges, by well-known brokers, and that’s the way to buy them. Gold scams are out there.
GLD, the SPDR Gold Trust, is the virtual way to own actual gold. A share is valued at the approximate price of one tenth of an ounce of gold. Some investors feel this is the closest practical alternative to storing the physical metal themselves.
SLV, the iShares Silver Trust, owns silver. When you buy a share of SLV you are buying a close equivalent to an ounce of silver. Price differences are due to transaction costs and fund expenses, as with GLD.
GDX, Market Vectors Gold Miners, has 80% or more of its assets in the stocks of companies that primarily mine gold, including small, medium, and large companies, both North American and worldwide.
GDXJ, The Junior Gold Miners ETF, owns shares of small and middle-sized gold and silver mining companies, worldwide.
DGP is one of the leveraged gold funds. It aims to move at twice the daily movement of the gold price. Obviously, it’s risky. DGZ is short gold. That is, it is set up so that its price moves opposite to the daily movement of the gold price. DZZ aims to move at twice the opposite of the daily change in the gold price. Risky DGP, DZZ, and DGZ are from Power Shares.
AGQ aims to move at twice the rate of the silver price. ZSL aims to move at double the opposite of silver price movements. Both these risky leveraged funds are from ProShares.
These are only sketches of a few of the EFTs available. This is a very crowded investment style, which some might take as a warning.
Investigate further before you invest in an ETF. Good sites for research include yahoo finance and msn.moneycenter. Gold ETFs are easily bought and sold now, though they might not be in a crisis. For many people though, unleveraged ETFs are the best way to buy gold and silver.
Individual Gold Stocks
Individual gold stocks are not for the fainthearted either. They range from giant producers like Freeport-McMoRan to small junior companies. Great fortunes have been lost in companies like these, though some do well.
Large companies are safer bets, because there is more information available about them, they have a track record, and their shareholder base is more stable.
Junior companies are the Wild West. Nevertheless, these companies are more responsive to changes in the gold price, whether up or down. Some small miners may be the established firms of tomorrow, or may be taken over at a premium by the current rulers.
A solid gold stock might belong in anyone’s portfolio for the long term, but with valuations stretched, this might not be the time to buy one.
Antique or period jewelry may be a good investment, if you are knowledgeable about it.
Buying modern jewelry, on the other hand, is like buying a new car. Depreciation with purchase is enormous, and the cost of the product is often far higher than the cost of the materials. If the gold in a piece is what you’re after, don’t buy jewelry, just buy some gold.
If you like jewelry, buy a handmade piece from etsy.com or a local artisan, or choose something more mainstream from a source like Tiffany’s or Blue Nile, but don’t expect to profit from it.
Some financial circumstances could lead to another doubling in the price of gold. We have all heard about such possibilities. It’s possible.
On the other hand, in 1980 the gold price dropped 40 percent in two months. It may be exciting to take a flyer in gold or silver, and you may do well, but don’t bet the rent. Be careful when you buy gold and silver.