How to invest in gold for beginners

Gold has captivated investors for millennia, serving as both a store of wealth and a symbol of financial security. In today's complex investment landscape, gold continues to play a vital role in portfolio diversification, though navigating the various ways to invest in this precious metal can seem daunting at first. But while these benefits have long been a draw for investors, the recent surge in gold prices — with the metal reaching historic highs above $2,700 per ounce — has been a big driver of renewed interest from those seeking both protection against economic uncertainty and the potential for quick returns. 

But the widespread availability of gold through mainstream retailers has also played a role in the recent uptick in gold investing. These days, even big-box retailers like Costco and Walmart are now selling gold bullion. That accessibility has made it easier than ever for any type of investor to buy in and has marked a significant shift in how everyday investors can participate in the gold market. 

While investors now have access to multiple sophisticated vehicles for gold investment, it's important to understand that each option offers distinct advantages and considerations. And, understanding these options is crucial for making informed decisions about how gold might fit into your broader investment strategy.

Learn more about this unique investment opportunity here now.

How to invest in gold for beginners

Here are four different gold investments to consider when starting out.

Gold IRAs

If you want to diversify your retirement portfolio, you can opt to transfer a portion of your existing individual retirement account (IRA) to a gold IRA.

You may choose a traditional gold IRA so your money grows on a tax-deferred basis over time, or you could opt for a Roth gold IRA which you'll fund with after-tax dollars. As such, you won't owe taxes on distributions you take during retirement. Also, If you run a small business or are self-employed, a Simplified Employee Pension (SEP) gold IRA may be a viable option. You could set up SEP gold IRAs for yourself and your employees.

Beginning investors may benefit from working with a reputable gold IRA company to set everything up so that you properly adhere to IRA regulations. The company can help you appoint an IRA-approved custodian and the depository to store the physical gold in your IRA. 

Learn more about your gold IRA options today.

Physical gold

Physical gold represents the most tangible and traditional form of gold investment, offering investors direct ownership of this precious metal in its purest form. This category encompasses several distinct products, from investment-grade gold bars and collectible gold coins, each with its own characteristics and market dynamics.

When considering physical gold, investors should understand the concept of gold purity, typically measured in karats or fineness. Investment-grade gold bars and coins usually contain 99.99% pure gold (often marked as .9999 fine), ensuring maximum value and liquidity. The premium you'll pay above the spot price — known as the "spread" — varies depending on the product type, with larger bars typically commanding smaller premiums than coins or smaller units.

Unlike paper assets, though, physical gold requires secure storage solutions, whether in a home safe, bank safety deposit box or professional vault facility. Insurance costs should factor into your investment calculations, as standard homeowner's policies often provide limited coverage for precious metals. Professional storage facilities offer comprehensive insurance and security but charge annual fees that can impact your overall returns.

The liquidity of physical gold varies significantly based on your chosen form and location. While major cities often have multiple dealers offering competitive prices, rural investors might face more limited options for buying and selling. Standard-weight investment bars typically offer the best liquidity, as their uniformity and recognition make them easier to trade. Collectible gold coins, while potentially commanding higher premiums, might require more time and effort to sell at optimal prices.

Gold futures

Gold futures are another way to invest in gold, although they are highly speculative and can be risky for beginning investors. With gold futures, an investor and seller enter into a contract where the buyer agrees to purchase a certain amount of gold at a specific price and date, regardless of market conditions.

That means if you're holding the investment and the price is dropping just before the contract's expiration date, you could lose much (or all of your investment). 

If you're considering investing in gold futures, you must understand how it works and the risks involved. The brokerage firm you work with may require you to sign a form indicating as much before opening up your account.

Gold ETFs

If you're new to gold investing, you may enjoy the familiarity of stock market investing by owning some stocks in gold mining companies. With this type of investment, your profits can be based more on the company's performance rather than the price of gold. But in theory, you could still profit if the price of gold rises and the company's stock increases as inventory becomes more valuable. 

Your gold investment could also grow if the company produces more gold or can mine at reduced costs. Conversely, you could lose money if the company mismanages its operations.

Gold exchange-traded funds (ETFs) are a popular way beginners can start investing in gold. With ETFs that exclusively hold gold mining companies, you can get exposure to gold and add diversity to your portfolio. Whether you invest in gold mining companies individually or through an ETF, you can buy these investments through an online broker.

There are multiple gold companies that can help you start investing in the precious metal. 

The bottom line

Before you start the process, you should know that investing in gold is not typically a way to grow your money. Over time, the stock market generally outperforms the price of gold. It can, however, be an effective way to protect it against volatility in the large economic climate.

Owning some gold is one way to diversify your portfolio (experts typically recommend limiting it to 5% to 10% of your portfolio). If you want to invest in gold, consider consulting with a financial advisor who can help you determine how to incorporate it into your overall investment strategy. Get started here now.