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How to Buy Gold Stocks

Stockhouse Editorial
1 Comment| July 24, 2019

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Gold is one of the most sought after precious metals on earth. It has been, historically and culturally, a symbol of wealth and status (with majority of the demand coming from jewelry production), while also having an important function within the global financial structure. With the introduction of fiat currency (government issued banknotes began to be used in 11th century China), major financial institutions still hold gold as reserves as a physical commodity intended to protect the integrity of the financial markets.

In short, gold will always be part of our lives. And knowing how to invest in gold stocks is an integral component that should be a part of any investor’s financial toolkit.

Click HERE for some of Stockhouse's Top Gold Stocks

What to Look for When Investing in Gold Stocks

Investing directly in commodities, such as gold or crude oil, tends to be more difficult and less malleable for investors than investing in stocks and bonds. A major reason for this is that stocks and bonds are readily transferable and are easily accessible to the average investor.

Historically, 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, per se.

Gold is far more accessible to the average personas an investor can easily purchase gold bullion (gold in its physical form) from a dealer or sometimes a bank. However, with the advent of more advanced financial instruments, gold, along with other tradeable commodities, has become much easier to invest in without having to buy the physical metal. There are now Exchange Traded Funds (ETFs) that imitate the movements of the underlying commodity, giving investors direct market exposure. While not every commodity has an ETF, both gold and oil have ETFs. Each share of the ETF represents one-tenth of an ounce of gold, so if gold is currently US$1,650 an ounce, the gold ETF will trade at US$165 per share. As a result, this investment product is one of the easiest and least expensive ways to access the gold market.

In general, investors looking to invest in gold directly have three choices – they can purchase the physical asset, they can purchase an ETF that replicates the price of gold, or they can trade futures and options in the commodities market.

And always use your due diligence to find out which method is right for you.

New to investing in Gold? Check out Stockhouse tips on some of our Top Gold Stocks.

For more of the latest info on Gold, check out the Gold Trending News hub on Stockhouse.

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