5 Ways to Get Gold Exposure

There is so much talk about gold. For a long time gold has had, well…the Midas Touch in portfolios. Please forgive the horrible analogy, but I found it amusing. The question is how to buy gold. As far as I can figure, I have deduced five ways to get gold exposure. So, those looking for gifts…here are some ideas.

Gold coins are often issued by governments and .9999% pure. The US has the American Eagle (and recently Buffalo), Canada - the Maple Leaf and South Africa – the Krugerrand. Other nations also have gold bullion coins. The European Union is know for the Austrian Philharmonic coins. For a coin collector, certificates of authenticity often will accompany the coins. These coins are actual legal tender and often have face values ranging from $5 to $100, although their intrinsic value is much more. These coins can be purchased from coin dealers and directly from government mints.

There will always be a (small) premium to buying these coins as the dealer has to make money and some collectors aggregate these coins. However this is an easy and very direct means to gathering and investing directly in the bullion. Ingots are very similar to coins, insomuch as they are direct bullion investments and can often be purchased at coin dealers. Resale of these items is also very easy, as one can sell to almost anyone. The physical metal is already in denominized form if society was to (d)evolve past the fiat currency of today.

On the downside, these coins and ingots are physically able to be lost and/or stolen. They may be insured, but you alert the government by doing so. As a side note; it is not uncommon to purchase gold and the seller to ask for your social security number. The governmental issue is important as all the way back in my great-grandparents generation (the 1930s); President Franklin Roosevelt had a law passed that in extreme financial crisis the government could confiscate individuals gold and silver. This eminent domain has not been enforced in nearly 80 years, but it is something to note. For another side note, this law does not pertain to platinum or palladium, as they are (were) considered industrial – not precious – metals.

These have been written about at nauseam. Most investors are familiar with the GLD, the SPDR Gold Trust. The ETFs allow one to have an investment in gold, but does not allow access to physical gold. Aside from the GLD there are This product is bought and sold like a stock and is equivalent to the share of gold less maintenance fees, management fees and insurance.

On the downside, there is constant speculation that the ETF does not have all the gold it should. Where is the vault where it is held? When can investors see an audit? Secondly, like a stock, in the event of a negative run, I’ll call it a ‘dump,’ the price could evaporate very quickly.

Futures are an interesting investment in unto themselves. One is betting on a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. This is not based on the present value or spot price, but speculation. One may buy and sell these contracts by brokerages, both standard and discount.

In buying future contracts, one only has to put up a small fraction of the cost, say 5% – 15%. Now if gold goes up 5% – 15%, you double your money. If gold goes down 5% - 15%, you get a handshake an honorable mention of losing your entire investment.

Like everything, there are many types of mining companies that are public. Figuring we are exclusively speaking about gold, there are exploration, development and production companies of all sizes. Typically the junior companies are the most volatile offering the most risk and reward. They are also the most likely to be bought by a mid-tier or major.

The upside is expected, one may double…triple…quintuple their investment. The downside is that one may lose their a great majority of their principle if the company fails.

The final means to gold exposure is in jewelry. This is easy to come by and pretty self explanatory. There is a resale market of this and it does allow physical possession. Like coins and ingots there is a markup, this time much more than a few per cent as the metal has been crafted. Like coins, the jewelry can be lost or stolen but cannot be taken with eminent domain. As a matter of fact, the ONLY thing that cannot be repossessed for bankruptcy is a wedding band.