Risk of buying gold stocks: price fluctuation. Investing in gold stocks is not the same as investing in gold bullion or investing in a Silver and Gold IRA. Multiple factors, in addition to the price of gold, will cause the price of gold stocks to fluctuate in the open market. A “promissory note” with a gold price is still a “promissory note”, but investing in a Silver and Gold IRA can provide more stability. Mining stocks and exchange-traded funds continue to represent counterparty risk. To learn more about the risks associated with investing in gold stocks, click here.
There are also systematic risks involved. For example, by investing in the shares of a gold company, you expose yourself to the economic conditions of the company's country of origin. At first glance, buying gold may seem like a simple and straightforward process. However, there are dangers, such as falling into the trap of a telephone seller that their coins are “not confiscable” and somehow have more value because you bought them.
Basic ingots are the way to go when investing in gold. We have said that the price of gold works incredibly well even in times of uncertainty. Therefore, a good method to balance the volatility and return on your investments is to include gold in the list. After peaking in 1980, the price of gold has fallen by 65% in less than two and a half years.
You can see the volatility of this supposedly safe and stable asset class. Investors can invest in gold through exchange-traded funds (ETFs), buy shares of gold miners and associated companies, and purchase a physical product. These investors have as many reasons for investing in metal as there are methods for making those investments. You can also buy stocks of gold mining companies, gold futures contracts, gold-focused exchange-traded funds (ETFs) and other common financial instruments.
If you're buying gold for your retirement account, you should use a broker to buy and a custodian to hold your gold. For example, let's say you want to buy shares in one of the world's largest and most popular gold ETFs, the SPDR Gold Trust (GLD). Gold stocks can follow the price of physical gold, but they are also susceptible to other types of risk that may have an impact on the stock price. Some gold ETFs invest in stocks of gold mining companies, adding an additional layer of risk to investment.
In theory, you can receive gold from your ETF stocks, but it's not as simple as buying physical gold directly. Even central banks buy gold coins and ingots, not gold ETFs, to manage risk, promote stability and protect against inflation and the fall of the dollar. There may be more effective ways to buy and hold gold than a gold ETF, ways that don't involve a great deal of counterparty risk and don't operate within the limits of the banking system or the stock market. Investors who want to buy gold would be much better off opting for commodity bullion, such as the American Gold Eagles, Krugerrands or gold bars, of which several sizes are available.