Introduction to Investing in Gold

There's more than just physical gold

Investing in gold and buying it online is not rocket science as some would lead you to believe. Although it requires some diligence and patience it can be achieved with success.

Most people think of gold bullion when they think of the precious metal. However there are a lot of options besides gold bars which are often way too expensive and cumbersome to the average investor. The obvious choice next is gold coins. Coins are beneficial because they are often produced by national mints in the highest grades of quality in a variety of sizes. Someone with a larger budget can afford 1  ounce coins and someone with a smaller budget can afford 1/10, 1/4 and 1/2 ounce coins. Some mints even make 1/20 ounce coins and bars. This is an excellent way to own the precious metal over time.

Beyond that you can invest in gold equities. Equities are represented in stocks, ETF's and even futures contracts. These offer you the option to invest in gold in a much different way than typical bullion. These investments are not physical that you have to store or maintain the security of. Instead you can invest in gold mining companies, ETF's that hold gold - bet against it or bet with it when it goes up. Futures contracts allow you to buy gold at a predetermined future price.

Bars are one of the most common forms of buying bullion

Gold bars(100789)

What is Causing the Increased Prices of Gold?

Suppy & Demand

The world may or may not be falling apart. Nevertheless precious metals such as gold, silver and platinum are becoming increasingly rare and demand has sky rocketed! Poverty although still a major problem is beginning to subside in many parts of the world and as a result more and more people in China, India and other Asian countries are beginning to to develop disposible incomes. One sign of wealth and status which has been that way for thousands of years is gold.

Another source of demand for gold is coming from the demands that it requires in the production of 21st century technology like computers, laptops, tablets, and smart phones. Gold has long been known as an excellent conductor of electricity and is considered a must in many of these gadgets. Although a replacement will have to be found once gold runs out, until then you are best to have some in your portfolio.

Just as the demand is increasing, supply is steadily decreasing.  Gold miners are having more difficult times finding mining grounds and an even more difficult time securing those mines. Environmental groups are only the beginning besides dictators and unstable governments who could nationalize the companies before they get to bring their product to market.

Mining for Gold

It's Getting more Difficult and More Costly - How long will the precious metal last?

Mining by hand
Credit: The U.S. Army

Where you Can Go to Buy Gold

Bullion & Equities

Bullion is best bought from a dealer. To find the best dealers you can check independent ratings and reviews of precious metals dealers such as Gold Shark. These dealers allow you to buy gold in great quantities saving you money in processing and shipping. Discounts usually apply for bulk orders.

Buying in person does sound convenient but it does not allow for you to shop around for the best quality and savings like online. Besides buying in person does not have the authenticity or the security of buying gold online which often comes with a guarantee of quality and service.

Junk gold is also an option although it may not be the best. Junk gold is defined as old coins that are of questionable quality that can be valued at their melt value and weight based on their percentage of the precious metal. They are affordable for a reason.  The same can also be done for jewelry although this is even less quality as 24 karat is less than bullion in purity and content.

If you cannot afford large quantities buying direct is a simple method such as The U.S. Mint or the Canadian Mint.With mints there is no question of quality and no concern for reliability.

To consider equities for your portfolio you will likely need a brokerage account. Online discount brokerages are easy to use and require little prior experience. A good discount broker can be either TradeKing or ScottTrade. You will need to provide personal information such as social security and an address for tax reasons.

Once you have an account you can consider whether or not you want to choose stocks or ETF's. Stocks are more risky but usually contain higher rewards. The ETF's are more stable and secure. Often they are left for safe investors. The choice is entirely up to you but the best recommendation might be the most traded ETF GLD which holds real gold in its own inventory.

Be sure to check a financial news website for the latest stock quotes to make sure you are paying a fair price.

Options and futures are complicated equities to invest in and need proper reading and education. They are left mostly to the professionals and require a great deal of experience as well as adversity to high risk. The rewards are great but the risk can be even greater.