With gold's price high, which type is best to invest in? Experts weigh in
The price of gold has achieved several record highs this year. Its upward trajectory began in March when it hit an all-time high of $2,160 per ounce. Since then, it has hit several new record highs — with the latest record-breaking price occurring on August 13, when gold rose to over $2,506 per ounce.
Gold's value has soared to new heights this year for several reasons, including a long period of high inflation coupled with geopolitical and economic uncertainty. With those factors looming, investors turned to gold to help hedge against losses to their portfolios and protect against the possibility of market declines.
With gold's price hovering well above what it was this time last year, you may wonder what gold type is best to invest in now. After all, there are so many ways to gain exposure to this precious metal, including 1-ounce gold bars, gold stocks and gold coins. Here's what experts think.
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With gold's price high, which type is best to invest in? Experts weigh in
These are some gold options you may want to consider with the price of gold so high, experts say.
Gold bars and coins
Gold bars and coins can make a lot of sense to invest in when prices are high, experts say. After all, these physical gold investments offer numerous unique benefits, like liquidity, to investors, especially in today's economic climate — and there tends to be more demand for physical gold bullion when the price is up.
Christine Luken, financial coach and founder of Financial Dignity Coach, says her preference is investing in gold coins, especially ones considered legal tender. For starters, gold coins are smaller and less expensive than gold bars and easier to exchange for cash, Luken says. Plus, some gold coins are also worth more than the spot price of gold due to their rarity.
Andy Schectman, owner and president of Miles Franklin Precious Metals, recommends 1-ounce gold coins, such as the Gold Eagle and Gold Buffalo, which are issued by the United States Mint.
"These coins are in strong demand and benefit from legislation in nine states, with more expected to follow, recognizing gold and silver coins from sovereign mints like the US Mint as legal tender," says Schectman.
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Gold ETFs and gold mining stocks
Buying shares of a gold exchange-traded fund (ETF) might also be a good option, experts say.
"When purchasing gold, investing in low-cost gold ETFs may be a smart choice since choosing which gold company and how much is enough new production can be difficult from the outside looking in," says Steven Conners, founder and president of Conners Wealth Management.
Investing in a gold ETF is often less risky than investing in a single company, as buying one gives you a nice cross-section of companies in this area, Conners says.
When it comes to gold ETFs, Conners' preference is the gold ETF GLD, NYSE. The fee [expense ratio] is modest at 0.40%, and it provides for decent diversification, says Conners.
For long-term investors who are concerned about portfolio diversification, gold mining stocks or mutual funds that focus on gold companies may be suitable, says Kevin DeMeritt, founder and owner of Lear Capital, a precious metals firm.
"These investments offer the potential for both appreciation in gold prices and profits from mining operations, but they also come with higher risk due to the performance of individual companies," says DeMeritt.
What gold assets should you avoid now?
There are also some gold options experts say to avoid right now, experts say, including:
Gold jewelry
You may want to avoid investing in gold jewelry now, according to Conners.
"Investing in gold jewelry and expecting appreciation may not be the best decision for some investors, as with jewelry, it's the final product and other factors come into play," Conners says.
Modern collectibles and proof coins
It also makes sense to avoid investing in modern collectibles and proof coins, Schectman says, as those types of products are often promoted by predatory companies that create elaborate stories to justify significant markups.
Gold bullion coins and bars generally have much smaller markups and better liquidity than modern collectibles and proof coins, according to Schectman.
Gold futures and options
Due to the substantial risk of losing money with gold futures and options, you should avoid gold futures and options, DeMeritt says — especially if you're a beginner investor.
"These are complex financial instruments that require a high level of expertise and carry significant risk," says DeMeritt. The leverage involved in futures and options can lead to significant financial losses, after all, especially if the market moves against you.
The bottom line
Ultimately, the best gold type to invest in with prices near all-time highs depends on your financial goals, risk tolerance and how long you plan to hold the investment, says DeMeritt. Physical gold, like gold bars or gold coins, is typically better for long-term investing. Gold ETFs or gold stocks, on the other hand, might be more suitable for those looking to capitalize on shorter-term price movements. DeMeritt recommends contacting a financial advisor if you're unsure of which gold investment is best for you.
