Learning how to invest in gold and silver is an exciting way to diversify your investment strategy with a longstanding inflation hedge.
There are several ways to get direct or indirect exposure to gold, which has been a trustworthy currency for thousands of years, including some I invest in with small amounts of money myself.
How to invest in gold and silver for the first time
Stocks and funds tracking gold’s spot price can be the most accessible and affordable option for first-time investors.
While you own actual gold, I like the low investment minimums and ample availability through the best online stock brokers.
You may also prefer buying physical gold bullion and bars as you can own the actual asset. This method can also be better than digital gold for long-term investing.
Buying gold safely from a reputable dealer is essential to avoid scams and excessive fees.
Each investment option has different potential returns, benefits, risks, and expenses. I recommend researching digital and physical investment choices to determine which ones fit your strategy, risk tolerance, and budget.
5 Best Ways to Invest in Gold & Silver
Gold investments are available in several forms, although the methods of investment, potential investment performance, and ease of selling assets differ.
1. Precious Metals IRA
A gold IRA lets you buy physical gold and silver coins and bars of the finest purity and enjoy the corresponding tax benefits of a traditional IRA or Roth IRA.
One caveat is that the IRS requires IRA-eligible metals to stay at a third-party depository instead of self-storage.
Precious metals IRAs are one of the best ways to save for retirement, thanks to their tax perks and secure storage.
You will open a self-directed IRA with hands-on help from a gold IRA company. An IRA specialist will help you complete over 90% of the paperwork.
Typically, you roll over an existing IRA or a 401(k), as this retirement account is specifically for alternative investments.
Your investment options include gold, silver, platinum, and palladium from reputable mints.
Next, you will choose an IRA custodian to manage your paperwork and a depository location for fully insured safekeeping to comply with the gold IRA tax rules.
Some of the best gold IRA companies include:
- Augusta Precious Metals: Enjoy lifetime account support and hands-on education as you invest at least $50,000 in gold or silver and annual fees of approximately $200.
- Goldco: Investment options include gold and silver, with a $25,000 investment minimum and annual fees between $175 and $225. You may also appreciate its buyback guarantee to help you sell your metals at the highest price.
- Noble Gold Investments: Invest in gold, silver, platinum, and palladium coins with a $2,500 minimum investment. Store your assets in Delaware or Texas for extra flexibility. Annual fees are $225.
These companies have highly-rated customer service, many investment options, and competitive fees. As this is a retirement account, this is a long-term gold investment idea.
You should also determine if you can invest enough to offset the annual custodial and storage fees.
2. Physical Gold & Silver
Buying coins, bars, and jewelry outside of an IRA provides ultimate flexibility.
The minimum investment is smaller as you can purchase smaller, budget-friendly quantities and more products with lower purity ratings or non-currency coin rounds.
Bullion and numismatic coins are the most popular as they qualify as legal tender, but their melt value is higher than the face value.
Bullion coins have lower premiums than numismatic collectible coins. Lower premiums help you recoup your cost basis sooner so you can profit.
Consider rounds and bars from private mints to stretch your buying power.
For instance, I routinely buy these as they tend to be the most affordable when focusing on the future melt value instead of collectibility or legal tender status.
Some of the best options can be:
- Gold American Eagle Coins
- Saint Gaudens Gold Coins (Pre-1933 mint dates)
- Canadian Silver Maple Leaf
- 90% U.S. Silver Quarters and Dimes (Pre-1965 mint date)
- Gold Bars
- Silver Bars
Investment performance can differ by product, as collectible value and industrial demand are pivotal gold price factors.
However, product purity and gold weight are more influential in determining resale value.
I have purchased coins and bars from these reputable precious metals dealers:
- APMEX: Join a free loyalty program to qualify for exclusive flash sales, early access, and anniversary specials.
- JM Bullion: Search for weekly deals and reduced pricing in addition to its standard inventory.
- SD Bullion: This online gold and silver dealer offers a price match guarantee to help you pay the lowest premiums and get the highest buyback offers.
I also like this option because it allows you to avoid several hurdles that accompany gold IRAs.
Specifically, you can store your metals at home, avoid IRA custodian fees, and avoid pre-retirement liquidation penalties. That’s more money you can invest.
What about investing in fine jewelry, especially if you have a sizable collection?
High-end gold or silver jewelry can be another investment option, although you must carefully scrutinize the retailer’s price to the melt value.
Further, jewelry collectible values can be more volatile than coins as there are more pricing factors.
3. Gold Mining Stocks
Gold mining stocks provide indirect exposure to precious metals with more upside as you invest in a business instead of solely relying on the gold spot price to increase.
Select gold stocks also pay dividends, which is uncommon with precious metal investments.
However, a rising gold price doesn’t always mean that mining stocks appreciate.
Stock prices can remain stagnant or trend lower due to unprofitable drilling, adverse government regulations, civil unrest, and unfavorable legal action.
There are three different types of gold mining stocks:
- Gold Streaming Companies: Individual companies that invest in various senior and junior miners and earn royalties that stockholders receive as dividend income. This is my favorite of the three for beginners as you can earn passive income with less risk.
- Senior Miners: Well-established mining companies with bigger balance sheets. They are less risky than junior miners and their stock price tracks gold’s value more closely.
- Junior Miners: Inherently the most volatile of the three, these stocks have the smallest market cap but have the greatest upside potential under favorable market conditions.
So, you’re likely asking if it’s better to own physical gold or gold mining stocks. Ultimately, it depends on your investing goals and portfolio size.
To quickly summarize, gold miners can have more upside potential but are more speculative as you rely on successful mining projects.
In comparison, physical gold and gold-linked funds profit as gold’s spot price increases above your entry point. I invest in both kinds, and physical gold’s investment performance tends to be more directly related to the current price of gold.
Additionally, most miners also earn revenue from other minerals as most mining projects contain several resources.
For instance, senior miner Barrick Gold makes money from silver and copper production along with its gold reserves.
4. ETFs & Mutual Funds
Precious metals exchange-traded funds (ETFs) and mutual funds provide more instant diversification than individual mining stocks.
This investment vehicle may track commodity prices like an index fund or own shares of junior and senior miners.
I invest in gold and silver-linked ETFs as it can be more convenient than buying physical metals which involves transaction premiums and storage.
A handful of funds are redeemable for the underlying asset, such as the Sprott Physical Gold Trust (NYSE: PHYS).
However, I suggest buying real coins or bars upfront if you can afford it to avoid the redemption hassle later, which can be time-consuming and costly.
Some of the most-traded gold ETFs include:
- iShares Gold Trust (NYSE: IAU)
- iShares Silver Trust (NYSE: SLV)
- SPDR® Gold Shares (NYSE: PHYS)
- Sprott Physical Gold Trust (NYSE: PHYS)
- Sprott Physical Silver Trust (NYSE: PSLV)
- VanEck Gold Miners ETF (NYSE: GDX)
- VanEck Junior Gold Miners ETF (NYSE: GDXJ)
The above gold investment funds are passively managed and track the investment performance of their benchmark index, such as the NYSE Arca Gold Miners Index or gold’s spot price.
ETF gold investments are very liquid and excellent for short-term trading or long-term investing.
Anticipate paying a fund expense ratio between 0.25% and 0.60% of the position value. Most stock investing apps offer commission-free trading so you encounter fewer fees.
5. Futures and Options
Options trading and commodity futures are effective methods for experienced investors as these trades can require a margin account.
You have the ability to trade calls that make money if prices rise or puts that assume valuations will decrease before the contract expiration date.
Gold options and futures are short-term trades that can help limit downside risk impacting your stock portfolio.
You don’t have to buy or sell stock shares, although options can expire worthless if the trading strategy fizzles out.
Regarding futures, be sure to liquidate the contract before the delivery date to prevent taking physical possession of the commodity.
Most brokers specify cash-settled contracts to avoid this conundrum.
Why you should invest in gold and silver?
Learning how to invest in gold yields several valuable benefits:
- Portfolio diversification
- Hedge against inflation
- Millennia store of value
- Physical or digital ownership
- Potential IRA tax benefits
- Low minimum investments
- Selects stocks and funds pay dividends
Expert’s Take
Including gold and silver in your portfolio can provide diversification, but it shouldn’t be viewed as a primary growth driver for most retirement plans.
Instead, they can act as a potential store of value during times of economic uncertainty. Whether gold or silver is appropriate for you depends on your specific situation, risk tolerance, and long-term financial goals.
It’s essential to consult with a fiduciary professional who understands how these assets may fit into a well-balanced retirement plan, taking into account market timing and your unique financial landscape.
Why you shouldn’t invest in gold and silver?
Gold and silver investing disadvantages include:
- Potentially pricey premiums for physical ownership
- Usually requires a multi-year investment period
- Annual gold IRA custodian and storage fees apply
- Collectibles tax treatment is stricter than long-term capital gains
- Multiple gold price factors influence its spot price
- It isn’t risk-free
Getting Started with Investing in Gold & Silver
Comparing the numerous gold investment options may feel overwhelming at first.
As a beginner investor, consider physical bullion, gold IRAs, and digital gold stocks and ETFs to diversify your portfolio with low minimum investments and affordable setup fees.
I started by investing a small amount of money in physical coins, bars, and gold dividend stocks.
Gradually, I have been expanding my portfolio with a long-term target holding period to maximize my potential investment performance and minimize tax-reportable selling.
It’s essential to monitor your asset allocation to maintain a diversified precious metals portfolio.
Further, pay attention to premiums to avoid overpaying and reach your break-even point sooner when it’s time to sell or rebalance.
FAQs
Is gold and silver a good investment?
Gold and silver tend to be an excellent long-term investment when you can hold for at least five to 10 years as prices are cyclical.
Common coins and bars usually have the lowest premiums and competitive resale value. Additionally, precious metals are not a get-rich-quick investment.
Should I invest in gold and silver for retirement?
Gold and silver can serve as an effective inflation hedge and store of value against a depreciating currency.
You should have a multi-year holding period. Typically, gold is less volatile than silver and the gold-to-silver ratio can suggest the better metal to buy now.
Is it safe to invest in gold right now?
No investment is ever risk-free, although gold remains one of the best long-term investment ideas.
Gold has many positive pricing factors, including generationally high inflation rates and reduced fiat currency purchasing power, which dampen dollar-based asset values.
