Gold Investing Info

There are a variety of ways to own gold. A favorite among goldbugs is to own the physical bars. This is the purest way to own gold. Unfortunately, this has downsides, the main one of which is that you have to store it. If you store it at home, it is at risk for theft. If you put it into storage, you have to pay for the storage and there is always the issues of risk with the storage party.

One favorite way to own gold is through the GLD ETF. This ETF is a holding company which owns gold. Purists do not like the GLD since you technically do not own any gold yourself; you merely hold a derivative of an ETF that holds gold. So if, for whatever reason, the ETF’s gold holdings do not turn out to be as much as advertised, you are out of luck. Such sort of paranoid thinking was merely laughed at a few years ago, but as we have seen with the counterparty risk with Lehman Brothers and these other investment banks/hedge funds, it is not something to laugh at anymore.

Another way to make a gold play is to buy gold mining stocks. This avoids the counterparty risks/theft issues outlined earlier. However, it’s not a pure play on gold’s price. Gold miners do well of course when gold is higher in price, but some gold miners are more sensitive to price than others. Because of this, it is important to research the companies and tell how they would be affected under various pricing scenarios.

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