How to Invest in Gold Stock Options
Investing in gold stock options might be appealing to someone who sees a coming decline in the overall stock market, as the gold market tends to run inversely to the Dow, or to someone who predicts inflation of the national currency, as gold holds value and will never risk becoming worthless. Yet, receiving and storing physical gold can be cumbersome, expensive and risky, so investing in gold through the stock market is a viable alternative.
Other People Are Reading
Things You'll Need
- Money market account at brokerage firm
- Capital (at least $1,000)
- Internet access
Instructions
-
-
1
Identify the proper investment. There are a number of options when it comes to investing in gold on the stock market. A common option is to purchase stock in a gold mining company. If the price of gold is on the rise, the value of the company has the potential to rise even more than the price of gold itself, though this does carry the risk of investing in a company that might be poorly managed.
There is also the gold futures market, though this requires some sophisticated knowledge and is for the advanced investor. Another option is an exchange-traded fund (ETF), which is basically a fund of several gold companies that is easily exchanged on the market. If you are interested in investing in stock representing the physical commodity of gold itself, you can buy something called exchange-traded gold securities (ETG) from companies like exchangetradedgold.com. These companies basically hold gold certificates that can be traded on the market. This is akin to owning physical gold, though the gold is held and stored by a company.
-
2
Research players in the gold market. If you decide to buy gold mining stock, for instance, it's important to research a variety of companies to see which one is most likely to bring suitable returns. One way to do this is by looking at the performance history on a stock review site like Morningstar.
There will be much more uniformity in the ETG market, as it is modeled to replicate the effects of owning physical gold. Still, even with this investment, investigate various companies offering ETGs to make sure that the management of the company is strong and that the company is not going to go bankrupt or suffer scandals.
-
-
3
Make the transaction. You can make this move from a money market account. You can accomplish this by calling a broker at the firm handling your investment or, in many cases, use an online interface to complete the transaction with the click of a mouse. At this point, verify either with the company or with a broker that you are getting the "spot price" of the gold, which, according to goldprice.org, is the current price of the day, as determined by futures contracts. You want this verified because gold prices can be volatile. Also, the transaction may take hours or days to finalize, so you want a guarantee that you are getting the price as listed on that day, at that time.
-
4
Track the stock. Use either the brokerage firm's website, or a stock tracker such as CNN Money, to see how the investment is performing so that you can adjust it if necessary.
-
1
Tips & Warnings
It is worthwhile to read news about the company you've chosen to invest with and any press releases they might distribute so that you can be alert for any signs of danger or changes in policy.
