Gold Investing

Gold in US Dollars over the past 10 years.

Investing in Gold

There are a few ways to invest in Gold with each one carrying it's own risks and rewards.

One of the safest ways is to purchase physical gold and store it at your home or leave it at one of the storage facilities where you purchased it. In the latter case, you do not have to worry about theft.

Most people opt to place their gold into their banks safety deposit box which in general is the safest place. One issue that some may not know about is the Executive Order 6102. This is an order by the U.S. Government required U.S. citizens to deliver on or before May 1, 1933 all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67 per troy ounce. Under the Trading With the Enemy Act of October 6, 1917, as amended on March 9, 1933, violation of the order was punishable by fine up to $10,000 ($166,640 if adjusted for inflation as of 2008) or up to ten years in prison, or both.  

The most typical way to purchase physical gold is with coins or bars.
    Show above is a 1 ounce US Gold Eagle, the US Mint also produces 1/2 ounce, 1/4 ounce and 1/10 ounce coins.
Gold bars are also available in various sizes and designs as well.

There are a few ETF's that trade and trend with the price of Gold.

GLD - is the SPDR Gold Shares. The Trust holds gold, and from time to time, issues SPDR Gold Shares (Shares) in Baskets, in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. A Basket equals a block of 100,000 Shares. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion. The sponsor of the Trust is World Gold Trust Services, LLC. BNY Mellon Asset Servicing, a division of The Bank of New York Mellon is the trustee of the Trust. HSBC Bank USA, N.A. serves as the custodian of the Trust’s gold.

IAU - is the iShares Gold Trust. The purpose of the Trust is to own gold transferred to the Trust in exchange for shares issued by the Trust (iShares). The objective of the Trust is for the value of the iShares to reflect, at any given time, the price of gold owned by the Trust at that time less the Trust’s expenses and liabilities. The activities of the Trust are limited to issuing Baskets of iShares in exchange for the gold deposited with the Custodian as consideration, selling gold as necessary to cover the Sponsor’s fee, Trust expenses not assumed by the Sponsor and other liabilities, and delivering gold in exchange for Baskets of iShares surrendered for redemption.

CEF - is the Central Fund of Canada. As of June 2010 holds 55% Gold, 42.5% Silver and 2.5% Cash or Other net assets.  One of the advantages of owning shares is liquidity, you can sell these any time the US Stock market is open.

GTU - Central GoldTrust  is a gold holding trust that was created to hold gold bullion on behalf of investors and to provide investors with exchange-tradeable units (the Units) of ownership. The primary objective of GoldTrust is to provide exchange-tradeable alternative for investors interested in holding an investment in gold bullion.

PHYS - Sprott Physical Gold Trust is a closed-end mutual fund trust. The Trust seeks to provide an exchange-traded investment alternative for investors interested in holding physical gold bullion. The Trust is focused on investing primarily in long-term holdings of unencumbered, fully allocated, physical gold bullion and will not speculate with regard to short-term changes in gold prices.

SGOL - Physical Swiss Gold Shares is designed to offer investors a simple, cost-efficient and secure way to access the precious metals market. SGOL is intended to provide investors with a return equivalent to movements in the gold spot price less fees.

GLTR - Contains gold, silver, platinum and palladium in fixed weights. The ETP holds actual amounts of the metals in a J.P. Morgan Chase Bank vault. All of the bullion confirms to the London Bullion Market Association's and London Platinum and Palladium Market Association's rules for Good Delivery.

Leveraged Gold ETF's / ETN's (LONG):

DGP - Is the Deutsche Bank AG DB Gold Double Long.  The PowerShares DB Gold ETNs provide investors with a cost-effective and convenient way to take a short or leveraged view on the performance of gold

DGLPowerShares DB Gold Fund (the Fund) is a separate series of PowerShares DB Multi-Sector Commodity Trust (the Trust). The Fund, through its subsidiary, DB Gold Master Fund (the Master Fund), a separate series of DB Multi-Sector Commodity Master Trust (the Master Trust), invests with a view to tracking the changes, whether positive or negative, in the level of the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold Excess Return (the Index). The Master Fund also holds United States Treasury Obligations and other high credit quality short-term fixed income securities for deposit with the Master Fund’s commodity broker as margin. The Index is intended to reflect the change in market value of the gold sector. DB Commodity Services LLC (DBCS) is the managing owner of the Fund.

UGLDVelocityShares 3x Long Gold ETN leveraged long positions linked to the S&P GSCI Gold Index.

Leveraged Gold ETF's / ETN's (SHORT):

GLLProShares UltraShort Gold (the Fund) seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of gold bullion as measured by the United States dollar p.m. fixing price for delivery in London. The Fund will not directly or physically hold the underlying gold, but instead, will seek exposure to gold through the use of financial instruments, whose value is based on the underlying price of gold to pursue their investment objective. The benchmark price of gold will be the United States dollar price of gold bullion as measured by the London afternoon fixing price per troy ounce of unallocated gold bullion for delivery in London through a member of the London Bullion Market Association (LBMA) authorized to effect such delivery. The Fund’s investment advisor is ProShare Advisors LLC.

DZZ - Powershares Double Short Gold

DGLDVelocityShares 3x Short Gold ETN leveraged long positions linked to the S&P GSCI Gold Index.

There are gold miners indexes which carry has less risk than owning an individual mining company.
GDX - Van Eck Gold Miners
GDXJ.- Van Eck Junior Gold Miner index
GLDX - Global X Gold Explorers

NUGTDirexion Daily Gold Miners Bull 2X Shares
DUST -  Direxion Daily Gold Miners Bear 2X Shares

Individual Gold and Silver miners.  These carry high risk, but can provide the most reward.  By investing in individual miners, you are exposed to market, sector and company volatility.

Major Gold Miners

Barrack Gold - ABX
GoldCorp  - GG
Royal Gold - RGLD
Newmont - NEM
Agnico Eagle - AEM
Freeport McMoran - FCX
Seabridge Gold - SA
Anglogold Ashanti - AU
Lihir Gold - Lihr
Compania De Minas Buena - BVN
Tech Resources - TCK

Mid tier Gold Miners

Seabridge Gold - SA
Allied Nevada - ANV
Ivenhoe Mines - IVN
Kinross Gold - KGC
Eldorado Gold - EGO
Iamgold - IAG
Stillwater - SWC
Yamana Gold - AUY
Harmony Gold - HMY
Minefinders - MFN
Gammon Gold - GRS
Azurion Mines - AZK
Jaguar Mining - JAG
Taseko Mines - TGB

Individual Gold and Silver Junior miners.  The juniors produce small quantities of Gold on an annual basis and most are looking to grow their resource base. The explorers are not in production and do not have an income stream or revenues. Both junior and explorers carry highest risk, but can provide the most reward if you do your research and select the right one(s). By investing in individual miners, you are exposed to market, sector and company volatility. Of all of the Gold mining stocks, these are the most volatile and can have large percentage swings on a daily and weekly basis.

Junior Gold Miners/Explorers (Amex traded)

US Gold - UXG
Rubicon Minerals - RBY
Novagold - NG
Newgold - NGD
Richmont Mines - RIC
Golden Star Resources - GSS
Northern Dynasty - NAK 
Exeter Resources - XRA
Capital Gold - CGC
Northgate Minerals - NXG
Vista Gold - VGZ
Great Basin Gold - GBG
Entree Gold - EGI

There are many gold junior miners that trade on the Canadian markets that you can trade in the U.S. on the OTC and Pink Sheets markets. These are highly volatile and trading volume is often low.

If investing in the markets has a risk level higher than you can tolerate, you may want to consider dollar cost averaging into the physical metals each month. Purchase what you can afford each month on Gold or Silver coins or bars regardless of the price. It is a great way to start out with your investment in Gold and Silver. The money you spend each month on precious metals should be for the intermediate to longer term (2 years +) and considered part of your savings account.

Selling Gold Coins
A well written article on Gold Confiscation and the selling of Gold coins.
Gold Confiscation 1933

Gold investing related blog posts:
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Is the next bubble Gold?
Gold price appreciation since 2002
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Gold to Dow ratio
Gold Silver Ratio Coinage act of 1792
Gold Seasonals 1
Average Gold price appreciation by Month
Devaluing the dollar, Gold is money
Denver Gold Conference 2010 - Listen to Mining companies plans for the future