Investing in Gold

Investing directly in commodities, such as gold bullion or oil, tends to be more difficult for investors than investing in stocks and bonds. A major reason for this is that stocks and bonds are readily transferable and easily accessible to the average investor. Traditionally, commodities have been more difficult to invest in due to the complex way in which they trade through the futures and options markets. In other words, an investor can't just buy a barrel of oil.

Gold is more accessible to the average person because an investor can easily buy bullion, from a dealer or, in some cases, from a bank. However, with the advent of more advanced financial instruments, gold, along with other commodities, has become much easier to invest in without having to buy the bullion itself. There are now exchange traded funds that replicate the movements of the underlying commodity, giving investors direct exposure.

Gold is perhaps the world’s most liquid investment trading throughout the world daily. The market never closes and, as a result, you can buy and sell gold in any country at any time. Gold can form the cornerstone of a conservative or aggressive strategy because it tends to move in the opposite direction of paper investments. By including gold in a portfolio of stocks, bonds and cash can substantially help offset market fluctuations and reduce the volatility of the overall portfolio.

In general, investors looking to buy gold bullion have three choices: they can purchase the physical asset (which can be placed in a gold IRA), they can purchase an ETF that replicates the price of gold, or they can trade futures and options in the commodities market.