How To Invest In Gold

The first question you’re probably asking is whether gold is a good investment to begin with. Take a look at the performance of gold prices over the past 5 years versus the stock market.

gold_prices_vs_dow_jones_5_years

[Updated on June 2011] As you can see, gold is up more than 250% since 2005, while the Dow Jones Industrial Index is up about 15% for the same period.  In fact, gold has been the best performing investment for the past decade.

Of course, the best time to buy gold was few years ago, but its still not too late.

The Federal Reserve is doing its best to devalue the US Dollar (buying $600 Billion in US Treasuries will do that). As the dollar, and other currencies continue to drop in value, gold prices will continue to rise.

So how does one invest in gold?

It isn’t difficult and there are 3 main ways:

  1. I like buying gold coins. You can choose between collectible and bullion gold coins.  As the price of gold has increased, the spreads on the collectible coins have increased as well. Check out this list of my favorite gold coins. You can also buy gold bars, but the coins are more interesting and are likely to appreciate more as gold awareness increases.
  2. You can also buy the Gold ETF (GLD).
  3. You can also buy the Gold Miners ETF (GDX). I’ve also invested in this. Gold doesn’t offer any yield, so I periodically sell covered calls against this position to generate some income. Since gold stocks are incredibly volatile, the calls haven’t expired in the money yet. (which means they expire worthless and I get the keep the premium).

So whats your favorite gold investment?

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