6 Ways To Cash In On Gold
Posted November 9, 2009on:
Gold may be the hottest investment in the world right now.
This yellow metal now commands more than $1,000 per ounce, and many folks are making wild predictions about how far it can run.
Yet there are many ways to invest in gold and each has its pros and cons.
Whether buying simple jewelry as a newbie or arbitraging gold markets across international borders as a hardcore trader, we’ll show you how to make it happen, ranked from the least hardcore strategy to the most.
1. Enter As A Newbie With Gold Jewelry
Jewelry is the easiest — and most common — way to buy gold around the world. Gold bracelets, necklaces and watches are easy to find, familiar to buy, and have added fashion value.
But there are numerous reasons not to invest in gold through jewelry.
First, its price is usually much higher than for pure gold, sometimes having as much as a 300% mark-up. Secondly, the value of the item comes more from the craftsmanship and adjoined pieces, like gemstones, than from the actual gold. This can make it difficult to assess a piece’s real value. Finally, your bling is easy to steal.
If you must, buy wholesale, at auction, or in countries with reduced cost. And for international buying be wary of customs tax implications.
2. Gold Coins
Coins are another easy way to invest in gold.
Some have value more from their rarity than their actual gold content, but most are solid gold and coins’ relatively small units make them far more affordable and accessible than gold bars.
Popular coins like the American Gold Eagle,Canadian Maple Leaf andSouth African Krugerrand are readily available at coin shops, sites like goldcoins.org and bulliondirect.com, and directly from the U.S. Mint.
If you go to a store, bring your cash — most coin shops don’t like credit cards or checks. And consider a home safe or your bank’s safe-deposit box as a means of keeping the collection secure.
Lastly, remember that there’s a 28% collectibles tax if you sell the coins after owning them for a year. Ouch.
3. Paper Gold
Investors can buy certificates from various trusted sources which represent direct ownership of gold kept in storage by a third party.
The upside of holding this ‘paper gold’ is that it should technically track the price of gold perfectly.
It is also more convenient than many other investments since it allows you to buy and sell gold without having to transfer physical gold.
The downside is that you need to keep the certificates very safe.
You are also generally charged a storage or transaction fee for the gold backing your certificates.
Worse yet, in an end-of-the-world scenario, you could easily have your gold holdings frozen by the government regardless of what a few pieces of paper say. It’s happened before.
4. Gold Futures
Futures allow investors to buy or sell gold without the management fees of funds, and without being subject to the potentially bad decisions of third-party managers. Of course, you’ll still be held liable for your own ideas.
They also allow investors to make leveraged bets, since as futures they are margined and you don’t need to pay the entire value of your gold exposure upfront.
5. Gold Bars
A 400 ounce gold bar is the iconic representation of owning bullion.
The pool of individually numbered bars is deep and liquid, and most bars are stored in highly-secure vaults. Traditionally, that safety is reserved for professional traders like countries or companies who can buy millions of dollars worth at a time, not individuals.
That’s changing. Capitalizing on demand for gold, select retailers are selling and buying the gold alongside kitchenware and clothes.
6. Gold Traded In Far-Flung Markets
For the truly hardcore gold trader, the world is a big place and a sucker is born every day.
There are many markets for gold that are well off-the-beaten-track. Gold is traded between people in every country around the world, sometimes on a very small scale and in hard to find places.
Just remember, the smartest guy in the room is the one earning a spread regardless of market direction.
So carry a quote-enabled phone. And maybe a gun. Which brings us next to the most necessary gold investment of all.