Many investors view gold as a good hedge against rising prices and a store of value. Historically, it has also been a solid hedge in times of financial crisis. The best times to buy gold are when concerns about inflation or the economic crisis begin to arise, as gold tends to rise during those periods. Investors can invest in gold through exchange-traded funds (ETFs), buy shares of gold miners and associated companies, and purchase a physical product.
These investors have as many reasons for investing in metal as there are methods for making those investments. A relatively small increase in the price of gold can generate significant gains in the best gold stocks, and owners of gold stocks tend to earn a much higher return on investment (ROI) than owners of physical gold. Depending on your preferences and ability to assume risk, you can choose to invest in physical gold, gold stocks, gold ETFs and mutual funds or speculative futures and options contracts. Traditionally, buyers of gold have been older investors, but investing in gold may make sense for younger investors.
Investing in gold ETFs and mutual funds can expose you to the long-term stability of gold while offering more liquidity than physical gold and more diversification than individual gold stocks. Alternatives to investing in gold include buying shares in gold mining companies or gold exchange-traded funds (ETFs). Despite the appeal of gold as a safe haven, gold can be too risky for retirees who need income-generating investments, according to AARP. Investing in the shares of companies that extract, refine and trade gold is a much simpler proposition than buying physical gold.
Gold mutual funds, such as the Franklin Templeton Gold and Precious Metals Fund, are actively managed by professional investors. This means that the value of mutual funds and ETFs in gold may not fully match the market price of gold and that these investments may not perform as well as physical gold.