For thousands of years, the most popular investment was gold: the prettiest metal you could bend, re-form, bury and reuse endlessly.
And even though investors have many more options nowadays, gold still has its champions.
One hedge fund manager, who predicted the metal’s rise to an all-time high of $2,000 per ounce last summer, is confident the price could climb to $3,000 to $5,000 an ounce in the next three to five years.
With the yellow metal sitting near $1,750 after a more than $40 drop on Thursday — its biggest fall in six weeks — now might be an opportune time to follow his lead.
Is buying gold a good investment?
Diego Parrilla, manager of the defensive and gold-heavy Quadriga Igneo fund, is undaunted by the metal’s tumble and widespread expectations that the price will continue to slide.
“I think the drivers for gold strength not only remain but actually have been strengthened,” he told Bloomberg News last month.
Many people rush to gold in tough times. The shiny metal tends to hold up well during stock market crashes and periods of high inflation. .
Parrilla believes both could happen in the near future, as people are not appreciating the risks of the massive pandemic stimulus efforts underway, like today’s incredibly low interest rates. He expects the next decade will see runaway inflation that central banks cannot control.
“Central bank money printing isn’t really solving problems, it’s delaying the problem,” Parrilla says. “Gold will benefit purely from being a physical asset that you cannot print.”
How to make money with gold
If Parrilla’s argument is making sense, or you’ve got your own reasons for investing in gold, you have a few options available to you.
You can either buy physical gold like bars or gold coins, invest in gold mining company stocks or a gold exchange-traded fund (ETF).
1. Buy gold bullion or coins
The most straightforward way to put your money in gold is to buy and store gold bars, coins or jewelry.
To actually make a profit off the precious metal, you need to have a reasonable expectation that your gold can be sold for more than you paid for it. Unfortunately, gold prices are notoriously difficult to predict.
In the 1990s, gold barely hit $300 on a good day. Then, as financial and political crises loomed in the mid-2000s, people did what they always do and started buying up gold, which drove up gold prices.
Its value more than doubled from $800 an ounce in 2009 to $1,900 in 2011. But by 2013, the bubble had burst and gold was down to $1,300.
If gold forms part of your retirement plan, you can actually buy it through a gold Individual Retirement Account (IRA). That said, you’ll need to set it up with a special custodian or broker, and you may face unpleasant fees to cover the cost of storing the metal.
2. Invest in gold stocks
You can invest in gold without ever touching a flake of it by purchasing shares of gold mining companies on the stock market.
Some of the biggest publicly traded gold miners include Newmont, Franco-Nevada, and Barrick Gold.
The advantage is that if the price of gold suddenly plummets, you may not lose your shirt because the mining company could decide to focus on another metal.
The disadvantage of owning mining stocks is that they can decline with the rest of the market, even when the value of gold is steady. In fact, business factors can always come into play — factors like the company’s financials, the quality of its management team and long-term production prospects.
You can easily invest in gold miners through any number of investing apps — although a few will let you do it with just your spare change.
3. Put money into gold ETFs
Investors might buy into gold exchange-traded funds (ETFs) to avoid the uncertainty that comes with investing in a particular company.
Put simply, these funds are pools of money from investors that are poured into a variety of gold and mining companies. ETFs are traded like stocks; some of the most popular gold ETFs include SPDR Gold Shares, VanEck Vectors Gold Miners ETF and VanEck Vectors Junior Gold Miners ETF.
You will have to be prepared to lose a certain percentage of your investment’s value every year to the fund’s expense ratio. For example, with the largest gold ETF, SPDR Gold Shares, you’ll be charged 0.40% of your investment’s value each year.
Still, ETFs as a whole have very low management fees, and you save even more by buying them through a zero-commission investing app.
A tangible alternative
Before you go King Midas and turn your entire portfolio to gold, make sure to do your research and start slow.
Of course, if gold is just too volatile for your investment tastes, consider the stablity of U.S. farmland instead. There’s a reason a billionaire like Bill Gates is now the country’s biggest owner of farmland: Agriculture has been shown to offer higher risk-adjusted returns compared to both stocks and real estate.
And these days you don’t have to buy the whole farm to make hay. A new platform allows you to invest in farmland by taking stake in a farm of your choice.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
