Investing in Gold: What You Need to Know
Investing in Gold: What You Need to Know
The complete 2025 guide to gold investing - from physical bullion to ETFs, futures, and mining stocks
Introduction
Owning gold is one of the smartest long-term financial choices a person can make. There are several ways for you to get exposure to gold, each with distinct advantages and considerations that will be discussed in depth below. Whether you're considering buying gold online or in person, understanding your options is crucial for making informed investment decisions.
Our Expertise and Trust
The team at Gainesville Coins has more than five decades of collective experience trading gold. For the past fifteen years, we have earned the respect and trust of the precious metals community through our involvement in the investment industry:
- Authorized distributor for world's leading government mints
- Member of trade associations such as the American Numismatic Association (ANA) and the Industry Council for Tangible Assets (ICTA)
- Member of dealer networks such as Certified Coin Exchange (CCE)
- Authorized dealer for Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC)
Our expertise in investing has been featured in publications such as Reuters, Forbes, Bloomberg (radio and TV), TD Ameritrade Network, Kitco, and elsewhere. Over 180,000 readers visit our blog each month for insights into how the gold and silver markets work.
This gold investing guide will help you learn why and how investors purchase gold today. The information herein is updated for 2025 and beyond. After reading, you'll be well-equipped to make an informed decision about investing in precious metals.
Table of Contents
- Why should you invest in gold?
- Your gold investment options compared
- Physical gold: Bars, coins, and storage
- Gold ETFs: Convenient but limited
- Gold futures: Professional trading
- Gold mining stocks: Higher risk and reward
- Gold's role in portfolio diversification
- Gold vs. other investment options
- Best options for buying physical gold
- How to buy physical gold safely
Why Should You Invest in Gold?
Many people are under the impression that gold will always keep going up in value. And, yes, looking back over decades, gold has enjoyed a sustained increase in value over time. However, like many other commodities, it tends to fluctuate in value depending on numerous outside influencing factors.
Realistic Expectations
Gold may notch sustained gains in value over a long period of time, but those day-to-day spikes in value—$10 here, $25 there—aren't necessarily permanent stairsteps upward in price. Understanding gold spot price movements helps set realistic expectations for your investment timeline.
So, if gold isn't guaranteed to increase in value, why should you invest your money in it?
Built-in Demand
Because gold is used both as an industrial metal and in artistic and non-essential applications, demand for the precious yellow metal is built-in and seen across many market sectors. It can gain in value during both good times and bad.
Portfolio Protection
Gold may not offer guaranteed profits, but it helps secure your investment portfolio against recessions, inflation, and economic uncertainty. It traditionally serves as a safe-haven asset during market downturns.
Insurance, Not Investment
The main thing to remember about gold is that it's less an investment and more an insurance—a hedge against inflation. Though it may no longer be a currency, gold continues to be money.
Safe-Haven Asset
Safe havens are investments that maintain stable value in market downturns. This is why gold plays a key role in any balanced, diversified investment portfolio. During bear markets, when your other investments fall in value, steady or rising gold prices help counteract some of those losses.
Your Options When Buying Gold
Investing in gold can come in several forms, each with unique advantages and considerations. Understanding these options helps you choose the approach that best fits your investment goals and risk tolerance.
Physical Gold
Gold bars, coins, and bullion provide direct ownership of the precious metal. Offers the most control and eliminates counterparty risk, but requires storage considerations.
Gold ETFs
Exchange-traded funds that track gold prices through shares. Convenient for trading and portfolio allocation, but you don't own physical metal.
Gold Futures
Contracts to buy gold at future dates. Used primarily by institutions and professionals. High leverage and complexity make them unsuitable for most investors.
Mining Stocks
Shares in companies that mine gold. Offer leveraged exposure to gold prices but include business and operational risks beyond commodity pricing.
Let's compare the pros and cons of these different ways to invest in gold, examining each approach in detail.
Physical Gold
Physical gold is probably the first thing that comes to mind when you think of owning gold. For serious precious metals investors, physical gold represents the purest form of gold investment.
Forms of Physical Gold
Gold in physical form generally comes in coins or bars when bought for investment purposes. With the exception of China, India, and some of their neighbors, gold jewelry is usually not pure enough to qualify as investment-grade gold. 24-karat gold jewelry is not common in the rest of the world—and is impractical to wear.
- Gold Bars: Most cost-effective per ounce, available in various sizes
- Gold Coins: Higher liquidity, government-backed, attractive designs
- Gold Rounds: Private mint products, artistic appeal, competitive pricing
Why Not Gold Jewelry?
The two main drawbacks with buying gold jewelry as an investment are its lower purity and higher premiums. Most jewelry in the West is 18-karat (75% pure) or less. Higher mark-ups on jewelry are due mainly to greater labor costs. Jewelry premiums typically run 50% or higher above metal value, while bullion premiums are normally closer to 10% over spot from retailers.
Advantages of Physical Gold
- Direct ownership eliminates counterparty risk
- High liquidity when dealing with reputable dealers
- Most bullion coins and bars are IRA-eligible
- Tangible asset you can hold and control
Storage Considerations
- Professional vault storage (typically <1% annually)
- Home storage with proper security measures
- Safe deposit boxes for smaller quantities
- Insurance considerations for all options
Physical gold offers just as much liquidity as any other form of gold investment, so long as you can deal with paying a small storage fee to keep your gold in an approved vault. Vault storage is required for including gold bullion in your IRA, but many investors choose professional storage for the security and insurance benefits even for non-retirement holdings.
Gold ETFs
Essentially, an ETF is a fund that holds a large stockpile of gold and then sells shares of ownership that track the gold price. It's the most popular form of a gold derivative available in the market today. You can think of it as gold ownership that has been securitized.
How Gold ETFs Work
- Share Structure: Each share represents a fractional ownership of physical gold held in vaults
- Price Tracking: Share prices closely follow gold spot price movements
- Trading: Bought and sold like stocks through brokerage accounts
- Management Fees: Annual expense ratios typically 0.25% to 0.40%
ETFs are fine as a short-term hedge, or as a way of speculating on the gold price. These securities are a convenient method of gold exposure for portfolios managed through traditional brokerage accounts.
Important Limitations
However, ETFs come with fees and, unlike buying gold futures, the largest gold ETF (the SPDR Gold Trust, abbreviated GLD) expressly does not allow you to take physical delivery of your metals unless you're a bank that's an Authorized Purchaser. You can only redeem your ETF shares for cash settlement.
ETF Advantages
- Easy to buy and sell through brokers
- No storage or insurance concerns
- Fractional ownership possible
- Good for short-term trading
ETF Disadvantages
- Annual management fees
- No physical delivery rights
- Counterparty risk with fund
- Tax treatment as collectible
Gold Futures
Gold futures are basically a commitment to buy a specific amount of gold at a later date (usually one month in the future). Yet the contract size on the New York Mercantile Exchange (NYMEX) is 100 troy ounces. That means each contract is for roughly $200,000 worth of gold at current prices.
Futures Market Dynamics
- Contract Size: 100 troy ounces per contract (~$330,000 at current prices)
- Margin Requirements: Typically 5-10% of contract value
- Settlement: Most contracts settled in cash, not physical delivery
- Price Discovery: Where day-to-day gold prices are determined
Because it deals with bulk quantities of metal and involves international institutions, the futures market is where the day-to-day price of gold is determined. Most traders sell their futures contracts for cash rather than taking delivery of any physical metal.
Professional Territory
The majority of futures trading is between "Market Makers"—large banks and institutional entities—who merely swap ownership over metal already in vaults in London, New York, and other major hubs. For this reason, the gold futures market is subject to much greater leverage and opacity than other forms of gold investment. Individual investors should approach futures with extreme caution.
The high contract values, margin requirements, and complexity make futures unsuitable for most individual investors. Those interested in professional gold trading should thoroughly understand the mechanics and risks before participating in futures markets.
Gold Mining Stocks
Shares of gold miners—often simply called "gold stocks"—are generally more volatile than the gold price itself. Gold mining stocks tend to lose more value in a bear market for gold, but they may stand to gain more than the raw price appreciation of gold in a bull market for the metals.
Leveraged Exposure
Miners usually have greater upside than the underlying metal, but they often have a lower floor as well. A gold bar can't default on a loan or go bankrupt, but a mining company can.
Complex Variables
Gold stocks are more complicated investments. Trends within the mining industry and the financial health of individual firms are influenced by more factors than merely the gold price.
Additional Risks
Mining companies face operational challenges including labor disputes, equipment failures, regulatory changes, and environmental concerns that can affect stock prices independent of gold market movements.
Investment Consideration
Thus miners are a less straightforward way of getting exposure to movement in the gold market. Investors interested in mining stocks should research individual companies thoroughly, understanding their cost structures, reserve bases, and operational efficiency before investing.
More to Consider About Investing in Gold
Gold's calling card is that it tends to hold its value relative to everything else over time—unlike currencies, which we know are always being robbed of purchasing power by inflation over the long run. Understanding gold's unique characteristics helps investors set appropriate expectations.
Gold's Portfolio Benefits
- Stable Value: Maintains purchasing power over long periods
- Portfolio Protection: Helps counteract losses during bear markets
- High Liquidity: Easy to sell for full market value anywhere in the world
- Non-Correlation: Doesn't share strong correlations with other asset classes
- Inflation Hedge: Inversely related to purchasing power of currencies
What Gold Can't Do
But let's also examine what gold can't do. Gold may not be the single best inflation hedge at any given time. It's incredibly unlikely the gold price could ever rise enough in a year to offer similar returns to the riskiest assets. For instance, it would be unheard of for gold to rise 500% in a year, like some stocks or cryptocurrencies have done.
Storage Requirements
Unlike equities, futures, or options, gold takes up space. That adds some friction to holding gold as an investment or moving it around. That's why gold is a long-term vehicle for wealth preservation.
No Yield
Gold offers no yield, and if you factor in storage costs, it actually comes with a marginally negative interest rate. However, when bond yields are low and real interest rates are zero or negative, this drawback virtually disappears.
Market Cycles
Gold can be "boring" at times! Some years its price trends sideways. Its bull markets come cyclically, and between them, gold's job is to hold value while inflation erodes currency purchasing power.
It's fair to say that gold is a more conservative investment than the stock market. As a safe haven, it serves a different role. Remember that gold is only a portion (perhaps 5% to 15%) of a fully diversified investment strategy.
Comparing Gold to Other Investing Options
It's worth considering gold in the context of other common investments, including equities (shares of stock), bonds like United States Treasuries, mutual funds, and real estate. Understanding these comparisons helps determine gold's appropriate role in your portfolio.
Gold vs. Stocks
Stability: Gold provides steady value preservation while stocks offer growth potential with higher volatility.
Yield: Stocks can provide dividends; gold provides no income but preserves purchasing power.
Liquidity: Both highly liquid, but gold maintains value globally regardless of company performance.
Gold vs. Bonds
Safety: Both considered safe havens, but gold has no default risk while government bonds carry interest rate and inflation risk.
Income: Bonds provide regular interest payments; gold provides inflation protection.
Duration: Bond values fluctuate with interest rates; gold responds to different economic factors.
Gold vs. Real Estate
Tangibility: Both are physical assets, but real estate generates income while gold preserves wealth.
Liquidity: Gold is highly liquid; real estate can take months to sell at fair value.
Costs: Real estate requires maintenance and taxes; gold requires minimal storage costs.
Diversification Principle
These comparisons reinforce the importance of portfolio diversification. Each asset class serves different purposes: stocks for growth, bonds for income, real estate for income and inflation protection, and gold for wealth preservation and crisis protection. A balanced approach utilizing multiple asset classes typically provides better risk-adjusted returns than concentrating in any single investment type.
Best Options for Buying Physical Gold
You can start investing in gold by purchasing even just one bar, round, or coin. Most investors intend to hold their gold for a given period before liquidating when it's most financially advantageous. When you're ready to buy gold, understanding the options helps you make informed decisions.
Gold Bars
Bars are generally the least expensive form of bullion, allowing investors to buy the most gold per dollar. Available in fractions of less than a quarter ounce up to 400-ounce good delivery bars.
Well-known brands like Credit Suisse and PAMP Suisse qualify for inclusion in Roth Individual Retirement Accounts (IRAs).
Gold Rounds
Gold rounds often cost more than bars but usually much less than coins. They come in a much wider array of designs than bars, offering superb artistic appeal.
Many gold rounds from approved mints that are at least 99.5% pure qualify for inclusion in IRAs.
Gold Coins
Though the most expensive option, gold coins are monetized as legal tender coinage. They're often the most highly liquid since more buyers are familiar with gold coins.
Popular coins like American Gold Eagles and Canadian Maple Leafs qualify for inclusion in IRAs.
Premium Structure
Understanding premiums—the amount above spot price—helps you make cost-effective purchases:
- Gold Bars: 5% to 20% over melt value (smaller bars = higher premiums)
- Gold Rounds: 8% to 15% over melt value, depending on design and mint
- Gold Coins: 10% to 20% above melt for bullion coins
- Numismatic Coins: Can sell for many multiples of spot price based on rarity
How to Buy Physical Gold Safely
So, you've decided you want to buy gold bars, rounds, and/or coins... Where to go from here? Your best bet is working with a reputable gold dealer or bullion broker who can provide secure transactions and fair pricing.
Avoid Common Pitfalls
Be careful if you're choosing a gold dealer based solely on price. While you might find outfits selling gold products advertised for lower premiums, you could end up paying much more than expected or receiving counterfeit products.
What to Expect from Reputable Dealers
Retail venues such as established dealers offer you the opportunity to buy gold in-person or online at fair market prices. You will pay more than melt value—dealers need to cover overhead, insurance, and business costs while providing safe and reliable service.
- Fair Pricing: Competitive premiums that reflect current market conditions
- Transparent Costs: Clear breakdown of spot price plus premiums
- Secure Shipping: Fully insured delivery with tracking
- Storage Options: Professional vault storage available
- Buyback Programs: Liquidity when you're ready to sell
Hallmarks of Credible Dealers
- Fair prices—not too high or too low
- Physical address and prompt customer service
- Decent return policy for satisfaction
- Professional affiliations and certifications
Red Flags to Avoid
- Pressure sales tactics or limited-time offers
- Prices significantly below market rates
- Lack of physical address or contact information
- No established business history or reviews
Professional Affiliations
- American Numismatic Association (ANA)
- Industry Council for Tangible Assets (ICTA)
- Professional Coin Grading Service (PCGS)
- Better Business Bureau ratings
Final Advice
If you do research on what you want to buy and choose a gold dealer you're comfortable working with, you should be in good shape. Don't forget to ask plenty of questions about pricing, storage options, and buyback policies. A reputable dealer will be happy to answer your questions so that you can begin investing in gold with knowledge and confidence. Monitor current gold prices to time your purchases effectively.
Backdoor trades and parking lot exchanges of checks and cash for gold often don't end well for buyers. Fraud prevention and consumer advocacy groups have reported many cases of victims paying for what they think are legitimate gold products that end up being gold-plated base metals or stolen goods. Stick with established, reputable dealers to ensure you receive authentic products and professional service.
Disclaimer: The information in this article is intended for educational purposes only and should not be considered investment advice. Gold investments involve risk, including potential loss of principal. Market conditions can change rapidly, and past performance does not guarantee future results. Always consult with qualified financial professionals before making any investment decisions.