Investing in the stock market and other investment options is great because you may grow rich if all goes well. However, a good investment portfolio is hardly complete without the yellow metal, gold. For years, gold has been the world’s ultimate store of value, and a symbol status and beauty.
Gold is the most enduring asset in terms of earning good returns to its investors. In fact, the value of the metal has been on an upward trajectory since 1973 after the US began the process of delinking the value of the dollar from the value of gold.
In under two decades, the price of gold had jumped from a mere $43 to topping $800. In the last two decades, from 2000 to 2019, the price of gold jumped from $378 to $1,490, another episode of epic growth. Curiously, the price of gold goes up during periods of economic recessions. Just look at the zenith of gold price between 2008 and late 2013!
We could go on without hesitating in analysing the profit potential of the yellow metal but that is not our business today. What is important is to know how you can tap into this potential. Here is how.
Ever fancied buying gold bars and stashing them under your bed? Well, this is the most direct exposure you could ever get when investing in gold. If you do not fancy gold bars, you could buy jewellery of pure gold or coins made entirely of gold.
However, while buying gold chains and coins is easy, the process of owning gold bars (or bullion) is long and cumbersome. First, some jurisdictions allow people to own just a few ounces of the yellow metal. Also, you need to get insurance for the asset!
Bet on gold using futures contracts
If the hassle is too much then limit your exposure by buying futures contacts. The Chicago Mercantile Exchange (CME) facilitates futures contracts for the yellow metal in a way that excludes the buyer from counterparty risk. Through futures, you can buy an asset and bet on its price without actually owning the asset. So you do not have to worry about insurance and weight limits!
Scoop up mining stocks!
While gold futures present a lucrative but less cumbersome option to invest in gold, the costs of the transactions are unforgiving. A cheaper alternative is to get into the equities market and buy stock of companies like Barrick Gold. Any time the price of gold ascends, this stock responds positively. Therefore, you get to exploit the income potential of gold without ever seeing the asset.