7 Ways to Invest in Gold
Investors have many avenues to gain exposure to gold, each with its own benefits and drawbacks. Let’s take a look at some popular options.
1. Physical Gold
The oldest form of investing is still quite prevalent today: buying and holding physical gold. Physical gold comes in various forms. You’re likely reading this article on a smartphone or device that uses physical gold as an electrical conductor. Gold coins, bars, jewelry, and bullion are some everyday items investors use to add physical gold to their portfolios.
Buying and holding physical gold might seem like a good way to simplify the investing process, but there are some complications with owning and storing physical gold. For starters, physical gold must be stored in a safe location, which often comes with recurring costs if you own a significant amount. If you store gold yourself, you must invest in a safe or other secure receptacle.
Physical gold is also highly illiquid; you can’t buy and sell gold on an exchange like stocks or futures contracts, although you can buy gold bullion at Costco Wholesale Corp. You must sell physical gold at a jeweler, bullion dealer, online marketplace, or another local collector.
Finally, taxes can be a significant headache when investing in physical gold bullion. The IRS considers physical precious metals like gold and silver collectibles, not securities. Collectibles held for less than a year will be taxed at the ordinary income rate like stocks, but the long-term capital gains rate for collectibles is a flat 28%. Obviously, 28% is much higher than the long-term capital gains rate on securities like stocks, which can be 0%, 15%, or 20%, depending on your income level. If minimizing taxes is your primary concern, owning physical gold is the least efficient way to make a gold investment.
2. Gold Mining Stocks
If you don’t mind a little risk in your portfolio, gold mining stocks could be a path to outsized returns. However, these stocks are volatile, and gold miners often face financial difficulties if their exploration efforts are unsuccessful. The day-to-day price of gold doesn’t matter as much for these companies as their mining operations, although a prolonged downturn in gold prices could limit their profitability. Individual gold mining stocks carry significant risks. If a gold miner has poor results, its stock price will likely plummet regardless of whether the spot price of gold rises or falls.
Mining companies are often looking for more than just gold. For example, Harmony Gold Mining Company (NYSE: HMY) looks for gold, silver, uranium, and copper from mining operations in the Witwatersrand Basin in South Africa, as well as locations in Papua New Guinea and Australia.
3. Gold ETFs
Gold exchange-traded funds (ETFs) are one of the most accessible ways to gain exposure to gold. These funds trade on major stock exchanges and can be bought and sold throughout the trading day, just like individual stocks.
Some ETFs are physically backed, meaning they hold gold bullion in secure vaults. Popular examples include the SDPR Gold Shares ETF (NYSE: GLD), the iShares Gold Trust ETF (NYSE: IAU) and the Van Eck Merk Gold Trust ETF (NYSE: OUNZ). These ETFs aim to track the spot price of gold closely, and their expense ratios typically range from 0.25% to 0.40%.
However, it’s important to note that the IRS may treat shares of physically backed gold ETFs as collectibles for tax purposes. In a taxable account, this means long-term gains could be taxed at up to 28%, which is higher than the capital gains rate on stocks. That said, ETFs held in tax-advantaged accounts like IRAs are not subject to this rule.
Other ETFs, such as the Van Eck Gold Miners ETF (NYSE: GDX), invest in gold mining companies rather than gold itself. These equity-based ETFs behave more like traditional stock funds, with tax treatment and performance tied to the underlying companies—not the price of gold alone.
4. Gold Mutual Funds
Gold mutual funds are professionally managed portfolios that invest in gold-related assets, often with a more active investment strategy than ETFs. These funds can include a mix of gold mining stocks, precious metals companies, and occasionally derivatives or physical gold exposure.
Unlike ETFs, mutual funds do not trade intraday—they are priced once daily after markets close. While they may have higher management fees, some investors prefer mutual funds for their active management and the potential for skilled stock selection in a volatile sector.
Well-known examples include the Fidelity Select Gold Portfolio (FSAGX) and the Franklin Gold and Precious Metals Fund (FKRCX). These funds focus primarily on mining companies, so their performance may diverge from the spot price of gold based on industry trends, geopolitical risks, and management decisions.
Since gold mutual funds typically hold equity securities rather than physical gold, they are usually taxed like stocks and don’t fall under the IRS’s collectible classification in taxable accounts.
5. Gold Futures
Gold futures are derivative contracts that allow investors to speculate on the future price of gold. These instruments are complex and best suited for experienced traders who understand leverage, margin, and the nuances of commodities markets.
Each standard gold futures contract represents 100 troy ounces of gold and is traded on the COMEX division of the CME Group. Contracts have set expiration months—typically February, April, June, August, October, and December. Unlike stock options, futures contracts don’t have a strike price. Instead, the buyer agrees to purchase gold at the market price on the settlement date unless the contract is closed before expiration.
For example, as of March 2025, the June 2025 gold futures contract is trading near $2,170 per ounce, reflecting the current bullish sentiment amid inflation concerns and geopolitical tension. If you expect gold prices to rise, buying a futures contract lets you profit from price appreciation. A $50 move per ounce on a 100-ounce contract could result in a $5,000 gain—or loss—depending on your position.
6. Gold Options
Options work similarly to futures but give you the right, not the obligation, to buy or sell gold at a specific price before a certain date. They can be used as a hedge against market volatility and give you more flexibility and control over your portfolio. They also offer the potential for quick profits if the price of gold moves in either direction, depending on your position. However, they come with significant risk because they're typically traded using leverage or borrowed money. Be sure to clearly understand how options work before investing in them.
7. Gold Royalty and Streaming Companies
Investing in gold royalty and streaming companies offers another alternative to direct gold exposure. These companies provide financing to gold miners in exchange for a percentage of their future production or revenue. Essentially, they earn income based on the production of gold without the operational risks associated with mining.
Royalty and streaming companies tend to be more stable than traditional gold miners, as they are not as affected by the day-to-day costs of mining operations. However, they still benefit from rising gold prices, making them a lower-risk, diversified way to invest in gold.
Why Should You Invest in Gold?
Some of the benefits of adding gold to your portfolio include:
- Diversification: Gold is a commodity that often does well in turbulent periods, and its price movements tend to be uncorrelated with the overall stock market. A portfolio with a diverse asset base can help protect your capital across bull and bear markets.
- Protection Against Inflation: In periods of high inflation, gold can preserve purchasing power better than cash and help investors maintain their wealth.
- Long-term Value Retention: Gold has been a valuable commodity for thousands of years and will likely continue to be so. Unlike a stock that can see its underlying company go out of business, owning gold is considered a safe way to preserve capital over time.
What Are the Risks of Investing in Gold?
Investing in gold has downsides as well, so you should consider the following risks when adding gold exposure to your portfolio:
- Volatile Price Swings: Like any commodity, precious metals like gold are subject to market volatility. Gold might be considered a safe haven, but that doesn’t mean it can't have whipsaw price action.
- Expenses: Physical gold requires storage and insurance, which can be costly, and is also subject to high taxation due to its status as a collectible in the eyes of the IRS.
- Potential Underperformance: Gold is often considered a safety play, but if the market or economy doesn’t roll over, gold could be left in the dust by the performance of other assets like stocks.
- No Income Generation: Unlike stocks or bonds that generate income through dividends or interest, gold investors solely rely on capital appreciation for returns, which may not appeal to those looking for regular income streams.
How to Find the Best Gold Stocks?
When doing your due diligence on the best gold stocks, consider factors like the company’s financial health, production costs, geographic exposure, and history of profitability. While some companies focus exclusively on gold, others diversify into related metals like silver or copper. Investors should weigh the risk and reward of each type of gold stock, from established producers to exploratory miners.
A good place to start is MarketBeat's Best Gold Stocks list, where you’ll learn about the differences between gold miners, streaming and royalty companies, and ETFs that provide exposure to the gold sector. Understanding these distinctions can help you align your gold investment strategy with your financial goals.
Next, enter your top choices into MarketBeat’s Gold Stock Comparison Tool to analyze and compare them side by side. You can evaluate key metrics like market cap, dividend yield, and analyst ratings to make informed decisions.
How to Start Investing in Gold
Thanks to assets like gold ETFs and mutual funds, you can get started with gold investing as quickly as you can open your brokerage app and purchase shares. Gold miner stocks and futures contracts can also be purchased on an exchange through a brokerage account.
Owning physical gold is a little more complicated. You’ll need to purchase assets like bullion or jewelry from reputable sources and store them safely. Physical gold is also taxed at a higher rate than assets like stocks or futures contracts, so always consult your investment plan or an advisor when adding a new asset class to your portfolio.
Gold: One of the Oldest and Safest Assets, But Not Without Risk
Gold is a unique investment asset. It has been desirable for thousands of years and has many practical uses beyond just shiny coins and pretty jewelry. And, unlike our investment ancestors, gold can be added to your portfolio today as easily as buying a stock or contracts on a futures exchange.
Whether or not gold is a worthwhile investment for your portfolio depends on your goals, risk tolerance, and investment timeframe. While gold is often considered a safe haven during economic turbulence, it's not without risk. Just like other asset classes, gold prices can have volatile moves, and predicting bear markets and recessions is hard. Gold may lag other asset classes like stocks during bull markets, and owning bullion is especially onerous from a tax perspective. Safe doesn’t mean risk-free, so consider talking with an advisor before adding gold to your holdings.
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