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 disadvantages of commodities on a Roth IRA?

    Discover what kind of commodity-based investments are allowed in a Roth IRA and what disadvantages commodity investments ...
  2. Can I buy ETFs for my Roth IRA?

    Invest in exchange-traded funds within your Roth IRA to maximize diversification and gain access to specialized markets and ...
  3. Can I invest in gold or silver with my Roth IRA?

    Learn how you can purchase gold coins and bars with your Roth IRA, or how you can diversify part of your assets by purchasing ...
  4. What are the main disadvantages of a self-directed IRA?

    Find out more about self-directed IRA investments and the role of controlling drawdown in the management of a profitable ...
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 ...
Related Articles
  1. Investing In New York City REITs
    Mutual Funds & ETFs

    Investing In New York City REITs

  2. Consumer Staples Defend against Volatility
    Mutual Funds & ETFs

    Consumer Staples Defend against Volatility

  3. Has Copper’s Time Come?
    Stock Analysis

    Has Copper’s Time Come?

  4. What Does The Dow Jones Industrial Average ...
    Investing Basics

    What Does The Dow Jones Industrial Average ...

  5. The Fear And Greed Cycle Lives On
    Markets

    The Fear And Greed Cycle Lives On

Trading Center