Gold Investing Information
Gold is a precious metal and a commodity that is measured by a Troy ounce, or 31.1034768 grams. The primary reason an investor would invest in gold is to act as a hedge against inflation. This is due to the fact that gold prices increase as the value of the dollar decreases, thus balancing risk in a portfolio. In 2001, gold was at $270 per Troy ounce, and in February 2010, gold had reached $1,080 per Troy ounce.
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Exchange-Traded Funds
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As many investors know, an exchange-traded fund (ETF) is like a mutual fund because it has many holdings within the fund, and it trades like a stock. This is one of the most simplistic ways to invest in gold. An ETF would give an investor exposure to gold-mining firms, physical gold/reserves or both. It's less expensive than buying numerous gold-mining stocks or physical gold bullion. However, the IRS taxes gold ETFs held longer than one year at 28 percent. This can be avoided by putting them into a Roth IRA.
Stocks
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Another way of indirectly gaining access to gold is investing in gold mining and producer stocks. Research the companies carefully. Each company can have a different production cost per ounce of gold. For example, company A has a production cost of $300 per ounce, and if gold is $1,000 per ounce, that is a $700 profit. If company B has a production cost of $235 per oz., this company clearly makes more profit.
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Physical Gold
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An investor can directly invest in gold by buying gold coins. It is important to buy from a reputable coin dealer, and keep these coins in a safety deposit box.
Potential
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Gold has the potential for profit in the wake of a decreasing dollar. Investors can set aside 5 percent to 10 percent of their portfolio allocations for gold (even silver) to hedge against a decreasing dollar and inflation.
Warning
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Please consult your financial planner or adviser before investing. Investments carry risk with the potential for losses.
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