Investing in physical gold comes with a significant list of inconveniences, including transport, security, purity verification and significant dealer buy and sell spreads. The potential to buy investments tracking the value of gold through a stock brokerage account makes it easier to take long-term or short-term investment positions in the precious metal. There are several types of gold stock investments trading on the stock exchanges.
The shares of a gold bullion exchange-traded fund -- ETF -- are backed by physical gold held in storage by the ETF sponsor company. The share price of a gold bullion ETF moves up and down to match the changes in the price of gold. Gold exchange-traded notes -- ETN -- use futures contracts instead of physical gold to track the precious metal. Some gold ETN choices are designed to go up if gold drops in value, allowing you to profit if you think gold will go down instead of up.
Gold Miner Stocks
The share prices of gold mining companies typically follow the price of gold. The profits of a gold miner will increase or decrease as the price of gold changes. One difference from physical gold is that a mining company can make money if the price of gold is flat, providing investment profit potential even if gold itself is not moving. Mining companies are evaluated based on the price they receive for gold in relation to the cost to produce one ounce. Small exploratory mining companies -- called junior miners -- can produce big profits for investors if a new source of gold is discovered and exploited.
Gold Miner ETFs
Investing in gold mining companies as a group can be accomplished through the handful of available gold miner ETFs. The ETF choices include funds holding almost all the different mining stocks, including stocks that do not trade in the United States. Also available are separate ETFs for the major mining companies and the junior gold miners, allowing you to choice the level of risk you want to accept.
Online Brokerage Account
You can invest in gold-related ETFs or gold miner stocks through a stock brokerage account with an online discount broker. With a brokerage account, you place an order for the stock or ETF you want to buy and the number of shares you would like to own. The commission is usually the same to buy stock or ETF shares with most online brokers charging between $5 and $10 for a single order. You can buy shares as long-term investments or buy and sell to profit from short-term swings in the price of gold.
Tips & Warnings
- Investing in stocks comes with the risk that you could lose all of your money. Proceed with research and caution.
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