How to Buy Gold

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Invest in gold in three ways: buying physical gold, such as gold bars or jewelry, buying ownership contracts that relate to the actual gold price or buying shares in gold mining companies. Learn the advantages and disadvantages of each method in this free video from an experienced floor trader on investing.

Part of the Video Series: Investment Advice
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Video Transcript

Hello, my name is Mark Griffith, and this is going to be a very short introduction into how to buy gold. Essentially there are three ways in which you can invest in gold. The simplest, the most obvious is buying physical gold, and that would be buying for example, gold jewelry, buying crew grams, buying ingots of gold, bars of gold. The second way that you should think about this is buying some kind of contract, its price is fixed to the price of gold. And both Chicago and New York there are contracts available where you can effectively buy something that means you have ownership of that gold, or you have ownership of a contract who's price tracks the price of gold, but you don't have to take ownership of it physically. That's the problem with the first type, is you have to decide where to store the gold bars, lets say you've bought yourself five gold bars, you have to put them somewhere. In fact, you probably will be leaving them at a bank in a deposit accounting cage, or in a safe somewhere, and you might have to pay for that. So there's physical ownership of gold, then there's ownership of a paper contract, which is designed so the price tracks the price of gold. And the third popular way to do it, is to buy shares in gold mining companies, and there's a variety of mining companies of course. There's some which only mine gold, there's some which mine a whole range of minerals. And you have a serious of problems there. One of the problems is that like all shares it's more complicated than simply the price of gold, that's to say, the company might have excellent gold reserves, but it might be badly managed, or the company might be very well managed, and actually have not such good gold reserves. So the closer you move towards buying shares in mining companies, the more complicated things will get. On the other hand, it's very simply easy to buy and sell shares and on occasion you might find it difficult, for example if you have physical possession of gold, it can be quite difficult to sell the gold. So you want to bare in mind, do you want to have the gold physically, do you want a contract that tracks the price of gold precisely, or are you happy to simply add some mining companies, some gold mining companies to your share portfolio. Think about those three, and then you should be in a position to get yourself into the gold market. One other thing to consider, is that lots and lots of gold is held in bullion form by central banks, and is used by central banks as an instrument for covering losses, for moving their own currency around, for defending their own currency. So if the currency is weakening, you might find that they are selling off gold in order to pay for day to day operations to defend their currency. What that means is gold is a good investment, but it's not as straight forward as it looks, it's widely used as a bullion reserve by large banks, and therefore the price can move in unexpected directions, so be careful. Good luck.


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