Current price of Gold

3 Ways to Invest in Gold.

One can invest in gold by owning gold bars and bullion coins, trading gold futures contracts(see explanation on futures contracts below), or investing in stocks of gold-related companies, such as gold mining.

For each type of gold investment you want to do, there are further different ways of doing it. You can buy physical gold on the spot market and trade gold futures in a commodity exchange, but nowadays you can also do both through purchasing shares of ETFs.

An ETF is an exchange traded fund that with a pool of money from investors, can go out to buy stocks, commodities, or gold in this case. Shares of such a fund are traded like stocks. There are both gold bullion fund and gold futures fund that would buy physical gold and futures contracts respectively.

As gold stock investors, you can pick individual gold companies yourselves, purchase gold mutual funds, or trade shares of an exchange traded fund that invests in gold-related companies.

Owning Physical Gold

Gold spot markets are where actual gold is bought and sold. Investing in physical gold, bars or coins, is the most direct way to track the changing gold price. But over time beyond a few pieces, storage can be a problem for gold owners.

On the other hand, a gold bullion fund can expose investors to the same price movements in the spot market, as such a fund would buy and physically hold gold bullion, which could be massive collection of gold bars.

But here the custodian issue is all handled by fund managers. Moreover, fund investors conveniently buy and sell fund shares on a major stock exchange, which increases holding liquidity if cash conversion is needed.

Trading Gold Futures

Gold futures are contracts that let you use today's set price to buy gold sometime in the future. If future spot prices are higher than the set price in the contract, you as the contract holder make money. If future spot prices are lower than the set price in the contract, you as the contract holder lose money.

Because average gold investors may lack the professional skills needed to be directly trading these contracts inside futures exchanges, a gold futures fund that is exchange traded can purchase such contracts on behalf of its shareholders.

Investing in Gold Stocks

Investing in individual gold companies risks having inadequate diversification. But if the stock picks are right, potential payoffs are much higher.

On the other hand, mutual finds and exchange traded funds that invest in gold companies both have much broader selections. Such funds are good for investors who prefer diversification and some professional management.

Gold mutual funds are actively managed by fund managers who constantly look for the best stocks to own. Gold exchange traded funds are passively run, as they invest in a fixed amount of pre-selected companies.

Regardless of which method is used, investing in gold stocks could become less effective in tracking gold price, if company-specific problems in management, production, and so on adversely affect a company's stock performance, despite the rising gold price.

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