How to Invest in Gold [2024] Gold Investing 101

Gold has been a sought-after precious metal for hundreds of years due to its unique qualities. Not only does it have a stunning lustrous appearance, but it also doesn’t rust or tarnish over time. 

Did you know that many of today’s top investors still use gold as a wealth-building vehicle? One study found that 85% of professional investors had some exposure to gold in their portfolio, which illustrates the lasting power of this precious metal. 

Making gold a part of your investment strategy is an effective way to diversify your portfolio. Here’s how to invest in gold and what makes this precious metal so appealing. 

What Is Gold Investing?

Gold investing is the process of purchasing gold products with the intent of growing your wealth. Over time, the gold will go up or down in value. Investors may sell their gold once it has increased in value enough to make a significant profit. 

Gold is one of the most popular alternative investments on the market due to its inherent historical value. The process of investing in gold can involve both physical gold and investment products tied to the value of gold, such as ETFs. We’ll discuss these gold investment products more in a bit.  

Why Invest in Gold?

In times of economic turbulence, many investors turn to gold due to its relative stability. Gold has been a valuable, sought-after material for thousands of years, and its value often transcends current economic circumstances. 

The price of gold is the same globally, so it’s not affected by the value of the US dollar or any other global currencies. As a result, many investors opt to add gold to their portfolios in times of global conflict. 

Additionally, gold is often perceived as a hedge against inflation. Its value tends to go up during times of inflation because its purchasing power increases relative to the inflated currency. Learning how to invest in gold can help consumers offset inflation-related losses or stagnation. 

Finally, gold helps you diversify your portfolio — something crucial for every investor to do. Having different types of assets in your portfolio can help you avoid sudden losses and weather economic ups and downs, as different assets react differently to changes in the market, and some, like gold, tend to be less reactive than others. 

How to Invest in Gold

When learning how to invest in gold, you’ll have several options to consider. Ultimately, you’ll need to choose the gold product that aligns best with your current investing capabilities. There isn’t one best way to invest money — it’s all up to you and your financial goals. 

ETFs and Mutual Funds

ETFs and mutual funds are often the most accessible form of gold investing for beginners. These two asset types are traded on a market, just like stocks. There are many mutual funds and ETFs that focus entirely on gold, allowing you to reap its financial benefits without having to purchase  and store physical metal. 

Most mutual funds are actively managed by professional investment companies, although some gold-focused investment companies are passively tied to the current gold index. You can purchase mutual funds through a brokerage account, the same way you would buy stocks. But mutual funds can only be traded at the end of the trading day, which is fine if you’re following a buy-and-hold investment strategy. Many major investment companies, such as Fidelity, Invesco, and VanEck, have gold-focused mutual funds. 

Exchange-traded funds, or ETFs, are passively managed, tracking the gold index throughout the day. These funds work very similarly to stocks, and investors can track their price and trade them throughout the day. Many beginner investors prefer ETFs to mutual funds because they are more accessible and tend to have lower fees. 

Futures and Options

Gold futures and options are another way to invest directly in gold without physically purchasing it. However, this approach is more complex than buying ETFs or mutual funds and can be very risky. Because of this, it’s not recommended for gold investing beginners. 

Futures are a contract to purchase a certain amount of gold at a specific date. Most investors sell the contract at a higher price before the date arrives, allowing them to make a profit without having to take ownership of the physical gold. 

Futures are popular among experienced investors because they have relatively low commission rates when compared to other investments. However, they come with inherent risk and need to be purchased very strategically to avoid significant financial losses. 

A similar option that is slightly less risky is to purchase gold options. An option is a contract that gives you the choice to purchase gold for a preset price at a preset time. While options are slightly less risky than futures in some aspects, they’re still very volatile. This means they likely won’t be the right choice for most investors learning how to invest in gold. 

Physical Gold

One of the most straightforward ways to invest in gold is to buy the physical metal. Some investors choose this option to minimize dealings with the marketplace. 

But buying physical gold is not as cost-effective as other gold investment strategies. This is because you’ll need to set up secure storage for your gold products and purchase insurance. 

Bullion is the most common form of physical gold among investors. It’s a form of pure or near-pure gold that’s been certified for quality. Most bullion comes in the form of bars, which are available in various quantities. But bullion is also sometimes sold as smaller coins. 

Another way to invest in physical gold is to buy non-bullion coins. Many governments around the world create these coins, and they’re available through dealers or even directly from the treasury online. The advantage of purchasing these coins is that they’re much smaller than bullion, which means you can start investing with a relatively limited budget.

Gold is also used to make fine jewelry products, and some investors opt to use jewelry as part of their investment portfolio rather than using it for fashion purposes. However, jewelry isn’t always the most viable investment, as the initial purchase comes with a significant markup, and the value of each piece can fluctuate significantly over time independently of the value of gold itself. 

Gold Stocks

If you’re learning how to invest in gold and you already have a stock portfolio, another option is to purchase shares from companies involved in the gold industry. For example, you can invest in companies that mine or process gold products. 

The benefit of this strategy is that it’s quick and easy, especially if you’re already familiar with the stock market. All you need is a brokerage account to make the investment. Check out our Robinhood review to learn more about this popular brokerage option. 

The downside of this approach is that you aren’t investing in gold directly. Although these stocks will be affected by the overall price of gold, they’re also affected by a number of other factors and are more vulnerable to fluctuations in the stock market. Gold stocks will also be affected by inflation more directly than gold ETFs or physical gold. 

Commonly Asked Questions About How to Invest in Gold 

How Can I Invest in Gold? 

There are several ways to invest in gold, including: 

• Buying shares of a gold-focused ETF or mutual fund (most accessible option for most investors) 
• Purchasing gold futures and options
• Buying physical gold products 
• Investing in gold indirectly by purchasing stocks of gold-mining companies 

Best Way to Invest in Gold for Beginners? 

While there are many ways to add gold to your investment portfolio, some options are more effective than others for beginners. If you’re new to investing, the easiest way to get started with gold is to purchase shares of a gold-focused ETF or mutual fund. These products are easy to purchase through a brokerage like Robinhood and are indexed directly to the price of gold in real time. This makes it easy to track the progress of your investment. 

Other gold investments aren’t nearly as accessible for beginners. Gold futures and options are highly speculative and come with inherent risk. Physical gold requires secure storage, which can be inconvenient and comes with extra costs. 

Should I Invest in Gold If I Don’t Make Much Money?

If you’re on a limited budget and considering investment options, gold investing may not be your best choice. Instead, consider building a portfolio of stocks using a brokerage like Robinhood that allows you to invest in fractional shares. This will help you build a more diverse and stable investment portfolio. If you’d like to add some gold to your portfolio, look for gold-focused ETFs. 

How Much Should I Invest in Gold?

Many experts recommend keeping your gold investments limited to 5% to 10% of your portfolio. However, this decision ultimately depends on your own personal investment goals, risk tolerance, and general preferences. 

For example, some investors are primarily focused on an inflation hedge and want to put more than 10% of their portfolio toward gold. But if you’re focused primarily on growth and stability, gold will likely be just one part of a larger investment strategy. 

Investing in Gold vs Investing in Silver?

If you’re learning how to invest in gold, you might also be considering investing in silver. Both of these precious metals are popular inflation hedges. However, gold has historically delivered better returns over long periods of time. 

Silver’s inherent value is in its industrial manufacturing applications, so its price is influenced by activity in this sector. When compared to gold, silver is less expensive to purchase upfront and usually remains stable in tough economic times, but the returns aren’t always as strong over time. Ultimately, you’ll need to decide for yourself which metal is the best fit for your investment strategy.