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5 ways to invest in gold today

GOBankingRates logo GOBankingRates 1/21/2017 Barbara Friedberg

Like many investments, gold bullion's value fluctuates -- but unlike stocks and bonds, you get no interest or dividend payments when you invest in this yellow metal. This means that if the value of gold drops, you lose money. Still, there are some good reasons to invest in precious metals, particularly gold.

Buy Physical Gold

gold blocks on top of hundred dollar bills and data spreadsheet:    © Africa Studio /    You can buy gold from a gold broker's website in the form of bars and coins in a range of sizes. Choices include American Gold Eagle, American Buffalo and Canadian Maple Leaf gold coins. Gold miners find the precious metal, which is ultimately sold by private and government mints worldwide.

A gold coin contains one troy ounce of gold, which equals 1.1 U.S. ounces. Like a stock share, the world commodities markets determine the spot price, or cost of, an ounce of gold. On Jan. 13 the price of an ounce of gold was $1,197.15. However, that purchase price did not include the gold broker's commission you would have had to pay.

You can buy gold coins and store them in a safe deposit box for approximately $30 to $70 per year or shell out 0.5 percent to 1 percent of their value to store them with a broker. Whichever you choose, the fee will typically cover your investment against theft or loss.

Buying gold in bars is another option. Among the many who sell gold bars, Credit Suisse is one of the most well-known, according to the Journal of Accountancy. One advantage of buying gold bars over coins is that the bars' commission prices are typically lower. Gold dealers will sell, hold and buy your physical gold, but before you make the investment, perform your due diligence on the dealer you're considering.

It's important to keep in mind that physical gold is taxed as a collectible when you sell it. And the tax rate is higher than the long-term capital gains rate for stocks that you hold for more than a year.

You don't get paid dividends or interest for holding gold like you do when you invest in stocks, bonds or CDs. When you buy gold, your investment either pays or doesn't, depending on the future commodity price. If gold's value increases, you win; if its value drops, you lose.

Although bullion is the better choice for investing in physical gold, buying jewelry is another option for buying physical gold. Gold jewelry is typically more expensive than bullion because it needs to be designed and crafted, but if you choose this option, you can use it as a fashion statement as well as an investment.

Find Out: Should Gold Prices Impact Your Investment Strategy?

Invest in Gold Mining Stocks and ETFs

     © STR New/Reuters      Gold mining stocks and ETFs diversify your gold-related investment -- they invest in the gold mining process and their prices typically move in the same direction as gold prices, according to the Journal of Accountancy. Additionally, gold mine production and financing costs impact these stocks.

Some gold mining stocks include Barrick Gold (ABX) and Goldcorp (GG), and ETFs include Market Vectors Gold Miners (GDX) and Market Vectors Junior Gold Miners (GDXJ). The stocks represent individual mining companies and the funds own multiple companies.

You can buy and sell gold mining investments through your investment brokerage account, and keep in mind that if you hold them for more than a year, they'll be taxed as long-term capital gains, which is more favorable than physical gold's collectibles tax rate.

Consider Gold Exchange-Traded Notes

woman searching trading on laptop:    © /    Gold exchange-traded notes are debt or bond-like securities that offer a rate of return aligned with an underlying gold index. Similar to gold mining stocks and funds, ETNs don't own physical gold.

Gold exchange traded notes include UBS ETRACS CMCI Gold (UBG) and VelocityShares 3x Inverse Gold ETN (DGLD). Each ETN has a distinct investment objective, so make sure you research these funds before you buy.

At maturity, a gold ETN's return is comparable with the gold investment return during the note's time period. A gold exchange-traded note's solvency is linked to the strength of the note's issuer, so if the ETN issuer goes bankrupt, you could lose all or part of your money.

Remember that if you keep a gold ETN, you can benefit from the long-term capital gains tax treatment. These investments are traded on typical investment exchanges and you can buy them through your brokerage account.

Discover Gold Futures Contracts and ETFs

gold block on top of contract document:    © William Potter /    If you're not averse to risk, consider buying individual gold futures contracts, which are agreements to buy or sell standard quantities of gold -- and the selling price, place and time are written into the contract. Futures enable you to gain -- or lose -- a large amount of money when there's a small movement in gold prices. Some examples of gold futures contracts include PowerShares DB Gold (DGL) and ProShares Ultra Gold funds (UGL).

These investments are usually traded on the Comex exchange, which is part of Chicago's CME Group. When you buy or sell a gold futures contract, you don't pay the entire amount up front; you pay only a percent or margin of it when you buy and pay the remainder in full at a later date.

Typically, investors purchase gold futures with ETFs or ETNs, and you can buy these funds in your investment account. The tax treatment consists of a 60-percent long-term capital gain and 40-percent short-term capital gain. Investing in futures contracts is best for speculators and risk seekers.

Check Out: 5 Precious Metal Investments Better Than Gold

This article originally appeared on 5 Ways to Invest in Gold Today


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