Today, investors buy gold primarily as a hedge against political instability and inflation due to gold's low correlations with other asset classes. In addition, many leading investment advisors recommend an allocation of portfolios in commodities, including gold, to reduce overall portfolio risk. Investors can invest in gold through exchange-traded funds (ETFs), buy shares of gold miners and associated companies, and purchase a physical product. These investors have as many reasons for investing in metal as there are methods for making those investments.
Of all the ways to invest in gold, the riskiest is to trade futures or options contracts, a form of speculative investment. Futures and options are derivatives, meaning that their value is based entirely on the price of an underlying asset. If you're concerned about inflation and other calamities, gold can offer you a safe haven for investing. During the 1900s, there were several key events that eventually led to the exit of gold from the monetary system.
A relatively small increase in the price of gold can generate significant gains in the best gold stocks, and owners of gold stocks tend to earn a much higher return on investment (ROI) than owners of physical gold. While investors should weigh each option to determine the best method for their circumstances and their risk tolerance, gold price ETFs and streaming and gold royalty companies are often ideal options for beginning gold investors. The most common gold coins weigh one or two ounces, although half-ounce and quarter-ounce coins are also available. Gold ETFs focus on owning physical gold or the shares of gold mining companies, creating different risk profiles.
Investing in gold mutual funds means that you own shares in several gold-related assets, such as many companies that mine or process gold, but you don't own real gold or individual stocks. And in fact, during financial calamities when investors flee the stock market, gold prices tend to rise. You can also choose to buy gold that you can use or that someone once used but that has been damaged in the form of gold jewelry. While you probably want to buy ETFs that actually hold physical gold, there are funds that invest in companies in the gold industry, often gold mining stocks or gold streaming companies that offer funding to gold miners.
The ingot is pure gold (99.5% to 99.9%) formed in bars or ingots, usually rectangular in shape that allow easier storage. During those times, investors who held gold could successfully protect their wealth and, in some cases, even use the commodity to escape all the confusion. Gold bars come in bars ranging from a few grams to 400 ounces, but are usually available in one- and 10-ounce bars. Throughout history, few investments have matched the popularity of gold as a hedge against almost any type of problem, from inflation to economic turmoil or exchange rate fluctuations and war.