During periods of crisis, investors often flee risky asset classes and invest in assets or commodities that they feel will hold value. Gold is a prime example.
Gold is relatively rare and it is respected across borders; therefore, unlike currencies, it is believed to hold its value over time. And gold's value isn't just speculation: Historic charts show that gold spiked from about $150 dollars an ounce in the mid-1970s to more than $1,600 an ounce in 2012. Clearly, this metal has proved its worth over time. The question is, what's the best way to invest in it? (Think the value of gold is unshakable? Read The Gold Standard Revisited to learn about its rise and fall.)
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
Investing in Gold
While collecting jewelry with a high gold content or gold coins is the method preferred by some, there are downsides to consider. For example, there is the issue of finding a safe place to store such merchandise. Finding a buyer for a particular piece may also be difficult. Plus, there is sometimes a very big markup on certain pieces.
But there is an alternative for investors who want to gain exposure to gold: the stock market. Check out these five simple gold stock plays.
|NovaGold Resources (NYSE:NG)||1.48B|
|Eldorado Gold (NYSE:EGO)||8.71B|
|SPDR Gold Trust ETF (ARCA:GLD)||63.6B|
|iShares Gold Trust ETF (ARCA:IAU)||8.82B|
While gold has fared well in the past, there is no guarantee that it will do so in the future. Another important thing to understand is that the price of gold can fluctuate widely. In 1980, the price of gold had risen to about $850 an ounce, a huge increase given that just a couple of years prior it was trading under $200. But not too long after that spike, gold lost a bit of its luster, and the price floundered until 2005 when interest started to pick up again. As such, investors who purchased at or near the top of the market in the 1980s had to wait about 25 years to recoup their investments.
SEE: A Holistic Approach To Trading Gold
Investors tend to flock to gold in times of market crisis. Widespread international acceptance and recognition of this circumstance makes it likely that this trend will continue in the future. Adding a little gold to your portfolio might help you mitigate risk; the five stocks presented here are a great starting point for your gold stock search.
SEE: Does It Still Pay To Invest In Gold?
Use the to trade the stocks mentioned in this stock analysis, risk free!
Chart AdvisorThere has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
Stock AnalysisA summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
Chart AdvisorCopper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
Mutual Funds & ETFsLearn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
Mutual Funds & ETFsLearn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
Mutual Funds & ETFsLearn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
Investing BasicsHeld onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
Mutual Funds & ETFsDiscover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
Forex FundamentalsDiscover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>