Gold Investment – How To Invest In Gold?

As an inexperienced investor, when you think about investing in gold, you wonder what options there are. There are basically two options for investors if you want to invest money in gold:

  • Option: You buy real gold in the form of gold coins and/or gold bars.
  • Option: You make an indirect investment in gold. This can be done, for example, using gold stocks, gold EFs and gold certificates. With this type of investment, you can benefit from the gold price trend without having to buy and store real gold directly.

Investing in gold on the stock exchange: Investing in gold stocks

You can buy shares in gold mines or exploration companies (so-called explorers) and thus become shareholders.

If you are interested in gold stocks, it is better not to put the capital into individual stocks because of the high risk. Especially as a newcomer to the stock exchange. This speculative approach is rather for experienced and risk-conscious investors who can assess the respective risk-reward ratio well.

It is often unclear how much gold companies can find and mine in the gold mines or how high the costs are. Gold mine stocks therefore often crash sharply when the news is bad.

If you want to invest in gold stocks, you’d better buy gold index certificates. This spreads the risk across several stocks. For example, there is the HUI index, which is the most important gold mine index (also called the “Arca Gold Index”). As of January 2019, it contains a total of 15 gold shares.

Of course, the HUI usually benefits first of all from a rising gold price. This means that when the gold price rises, the HUI price usually rises (and vice versa). But there is also an increased risk here, because there may be strong price fluctuations (these have also been greater in recent years than with the gold price).

Gold as an investment with gold certificates and gold funds

This is another way of investing in gold. Gold certificates and listed gold funds or ETFs (definition), which replicate the performance of the gold price or the HUI index just mentioned, are particularly popular here. This means that if, for example, the price of gold increases by 2% in one day, the corresponding gold certificate (or gold ETF) also increases by 2%.

Various banks offer certificates and ETFs with different names. I do not want to give any names (otherwise I might get the impression that I recommend buying a certain financial product, which I definitely do not). But you can just google it or ask the bank or trusted broker.

Warning: In addition to the relatively harmless certificates just mentioned, there are also many other gold derivatives that are significantly more risky. Here you have to be careful as an investor! Be especially careful of leveraged derivatives (these are leveraged certificates, CFDs, warrants, etc.). Large losses can quickly accumulate with these financial instruments.

If you are interested, it is better to buy less risky derivatives with a simpler structure (i.e. some gold certificates that show the gold price development 1 to 1). With the mass of derivatives available, it is easy to lose track of things. Therefore, always read the conditions for the derivative and only invest in the financial products that you really understand.

With gold derivatives and ETFs, there is also a disadvantage that should not be left unmentioned: If the issuer becomes insolvent, the money invested is usually lost (even if this is rather unlikely with a well-known provider). You should always keep that in mind.

Tips when investing money in gold

Gold stocks, gold ETFs and gold certificates can be bought easily and cheaply through online brokers.

In addition to gold, silver is an interesting precious metal (although not as popular as gold). And of course, you can also invest money in silver. As with gold, there are, among other things, silver bars, silver coins, certificates and ETFs.
Beginners of stock exchanges and money investments should better keep their hands off the indirect investment in gold. This is more for investors with experience who have a short or medium-term investment horizon in view. On the other hand, it is worth considering the long-term investment of a small investment as protection against inflation in times of crisis.

IF you are interested in investing in gold, you can contact any licensed stockbroker to talk to you about your needs. You don’t need to have good credit so that you can start trading in gold. If you are thinking of taking out a loan like a no guarantor loan to invest in gold stocks, you may want to consider other options first. While gold is a nice investment, there are still risks involved. Invest smartly and only what you can afford to lose.