How can I invest in gold?

By Investopedia Staff AAA
A:

Investing directly in commodities, such as gold or oil, tends to be more difficult for investors than investing in stocks and bonds. A major reason for this is that stocks and bonds are readily transferable and easily accessible to the average investor. Traditionally, commodities have been more difficult to invest in due to the complex way in which they trade through the futures and options markets. In other words, an investor can't just buy a barrel of oil.

Gold is more accessible to the average person because an investor can easily purchase gold bullion (gold in its physical form), from a dealer or, in some cases, from a bank. However, with the advent of more advanced financial instruments, gold, along with other commodities, has become much easier to invest in without having to buy the physical metal. There are now exchange traded funds (ETF), that replicate the movements of the underlying commodity, giving investors direct exposure. While not every commodity has an ETF, both gold and oil have ETFs. For example, the streetTRACKS Gold Shares (ticker symbol GLD) trades on the New York Stock Exchange and can be traded at any time throughout the trading day. Each share of the ETF represents one-tenth of an ounce of gold, so if gold is currently $600 an ounce, the gold ETF will trade at $60 per share. This investment product is one of the easiest and least expensive ways to access the gold market. (To learn more, see Introduction To Exchange-Traded Funds.)

In general, investors looking to invest in gold directly have three choices: they can purchase the physical asset, they can purchase an ETF that replicates the price of gold, or they can trade futures and options in the commodities market.

For more on the gold market, read The Gold Standard Revisited and What Is Wrong With Gold?

RELATED FAQS

  1. What are the differences between divergence and convergence?

    Find out what technical analysts mean when they talk about a market experiencing divergence or convergence and how they affect ...
  2. What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical ...
  3. How are Bollinger Bands® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets ...
  4. What are the most common strategies for using the Absolute Breadth Index (ABI)?

    Read about some of the ways in which technical investors use the absolute breadth index to measure whether a market trend ...
RELATED TERMS
  1. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  2. Short Put

    A type of strategy regarding a put option, which is a contract ...
  3. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
  4. Wingspread

    To maximize potential returns for certain levels of risk (while ...
  5. Volatility Smile

    A u-shaped pattern that develops when an option’s implied volatility ...
  6. Nadex

    Nadex stands for the North American Derivatives Exchange, a regulated ...

You May Also Like

Related Articles
  1. Investing in emerging market bonds might sound creative and fun, but sometimes it’s more profitable in keeping it simple and close to home.
    Mutual Funds & ETFs

    The EMB Emerging Market Bond ETF: Use ...

  2. Get Rich Slowly found about the insights on investing from about 2,000 selected individuals by an online survey. Do they have an investing strategy?
    Investing Basics

    Do You Have An Investing Strategy?

  3. The Vanguard S&P 500 ETF (VOO) offers a relatively safe investment opportunity for people who aren't sure which way the market is headed.
    Mutual Funds & ETFs

    Will Stock Market VOOdo Continue?

  4. VelocityShares 3x Long Crude Oil ETN has the potential for huge returns, but there are several reasons why you might want to steer clear for now.
    Mutual Funds & ETFs

    A Leveraged Oil ETN For The Future (Just ...

  5. Latin American exchange-traded funds combined two of the hottest buzzwords of recent years: Emerging markets and low fees. Here are the biggest.
    Mutual Funds & ETFs

    Want To Invest In Latin America? Here ...

Trading Center