Navigating The Golden Road
By Scott Chan
Inflation has come in hotter-than-expected during the first three months of 2024. Gold is a classic inflation hedge and its price has been rising.
If you are interested in investing in gold, there are several ways to invest.
The old fashion way is to just invest in the physical metal itself. You could buy gold in the form of bars, coins, or jewelry. You would have to consider insurance and/or storage costs and possible inconvenience. Also, the dealer will charge a markup when selling to you and apply a discount when buying from you.
Investing in Securities Instead of Physical Metal
A more convenient alternative is to buy securities related to gold.
For example, the SPDR Gold Trust (GLD) is the largest gold exchange-traded fund (ETF) that tracks the spot price of gold, but a drawback is that you can't redeem gold for the underlying bullion GLD holds.
Some funds do offer redemption, but there's a minimum requirement. If you don't own enough shares to qualify, you can redeem for the proportionate amount of cash.
Beyond funds that track the market price of the metal, you can also invest in gold stocks, such as shares of gold miners.
Potential Drawbacks to Mining Stocks
Gold miners produce and sell gold. They make money when gold sales more than cover their costs.
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