How to Invest in Gold

An interesting slide show on talks about the various ways to invest in gold.

As many coin dealers will agree, they start their slide show with the statement, “To get the best unleveraged exposure to gold’s spot price, physical gold is the best investment.”

However, they go on to talk about the challenges of acquiring and storing physical gold. Gold, by the way, is a heavy metal, and a quantity can pose security challenges for storage. But, several institutions offer safe, secure storage solutions.

In addition, the slides mention the ease of investing in gold stocks, but they note risks that may turn some investors away. The exchange trade funds (ETFs) provide investment alternatives that are physically backed with gold. However, with skepticism showing, how do you know they have the physical gold – especially these days when physical gold is becoming more difficult to acquire?

With higher risk involved, the slides talk about exchange traded notes (ETNs) that deal with gold futures. Now, people propose that gold will rise to $5000 per ounce, but are you willing to gamble that they are right? It really depends on not only your comfort level with risk but also on the amount of research you do before investing in ETNs.

Of course another investment in gold occurs with the mining companies. TV video discusses their favorite mining companies and includes interesting mining and melting footage.

However, one component they did not address was the increased cost of mining with the decreased ore yield per ton. See our earlier commentary on the gold supply and decreases in yield.

Have the investment analysts considered how this decreased yield will impact the mining companies’ cost structure and net profit? Before investing in mining stocks, make sure your research considers historical performance AND their efforts to counteract the reduced ore yields in their overall business strategies.

As a final measure, the slides talk about a gold miners’ exchange traded fund (ETF) that includes a collection of large cap mining stocks.

Which investment vehicle is best for you? Are you comfortable with risk? How much? Have you done the research on the ETFs, ETNs, and mining companies? How do you know the research materials are factual and complete? Just look at the bad information in the media and on the internet – what’s right, what’s incomplete and what’s misleading?

With all of that, acquiring and storing physical gold doesn’t seem to be as difficult and as much of challenge when compared to the risk of the other gold investment vehicles.