Investing in Gold Dilemma: Stocks Vs. Coins

Investing in Gold

Have you been lately giving a lot of thought to investing in gold? So have millions of American and international investors. Investing in gold has taken the center stage in the last few years with gold prices reaching all time historical highs, huge state budged deficits and growing economic unrest across the globe. Investing in gold allows investors to diversify their investment risks and provide a safe heaven for themselves from the hyperinflation.

However, once you make a firm commitment to investing in gold, the next question that comes to mind is what form of gold investment you should go for. There are multiple ways to invest in gold, namely, gold bullion investment, gold ETF, gold bonds and gold mining stocks. Various investors display various preferences to certain types of gold investments. Some favor buying gold coins, while others choose gold futures or opening a gold IRA account.

The simplest and most obvious way is to buy gold coins. It is rather easy to do by finding several well-known gold coin dealers online and checking their prices to the spot price of gold on a certain day. This allows you to purchase gold coins as close to the spot price of gold as possibly with the lowest premium fees. However, not all gold coins are created equal; there are numismatic gold coins and gold bullion coins. Generally, individuals working on investing in gold are urged to stay away from numismatic coins that draw their value not only from the actual metal content but additional factors like coins’ grade, rarity and demand factors that are irrelevant for investors and are only considered a “waste of money”. What investors need is gold bullion coins. These coins have no numismatic value and only base their price purely on the actual gold content plus dealer mark ups. The ultimate goal for any investor is to acquire these bullion coins as close to actual gold prices as possible. The lower the dealer premiums, the better of an investment it is!

As of today we can name several really good choices when it comes to buying physical gold bullion such as Canadian Maple Leaf and South African Gold Krugerrands. These coins typically carry lower premium fees compared to other similar gold coins such as American Gold Eagles or Chinese Gold Pandas.

Moving onto gold stocks and whether you should consider investing into them. A lot of investors are puzzled whether it is a good or bad choice. Well, the answer depends on the choice of your stock. A poor stock selection can virtually destroy your gold investing portfolio, while excellent picks can make you lots of money down the road. A gold stock is a share in a company that is involved in gold exploration, development, consulting services and/or actual gold mining. By buying gold shares you are entitled to partial ownership of these businesses based on the number of stocks you acquire. Similarly to buying any stock, you need to do your homework before you actually purchase anything.

There are typically 2 major types of gold stocks, those of gold mining companies or of companies that are involved in the development or exploration of potential gold ore rich areas. You definitely need to be familiar with methods of stock analysis, read financial statements and follow latest gold market trends. If you think you have all of the above mentioned knowledge, then you should definitely consider investing into gold shares.

Never follow any gold shares advice or buy based on hot stock picks because these could be stock scams that are so common on the Internet. When analyzing gold mining stocks, look at a company as a whole, learn about its positioning of gold mines, financial statements and performance charts, learn how much their actual cost to one ounce of gold production ratio is and other financial data. With time, you will learn to identify these numbers as good or bad and will be able to make your own stock picks based on solid data and not somebody’s speculation.

Some investors who want to invest in gold mining stocks without having to analyze the financial data have an option to invest to gold investment companies or mutual funds. Each mutual fund has its own financial goals, portfolio placements and management. It’s important to evaluate these before buying into one of these funds.

As a final note, both gold shares and gold coins have a place in any investment portfolio. The answer what to invest into depends mainly on what you are trying to accomplish and whether you possess necessary knowledge to assess shares as an investment. Some investors invest exclusively in gold bullion, while other buy gold shares, the rest prefer a little bit of everything.