With economic uncertainty looming in 2023, many investors are looking to diversify their portfolios with gold. The global demand for gold reached 4,563 tons in 2021, the highest in over a decade. As a tried and true stable asset, gold can provide stability when markets become volatile. This comprehensive guide will walk you through everything you need to know to make the best gold investment in 2023.
Gold has long been considered a safe haven for investors in times of crisis. While gold prices fluctuate, they have consistently increased in value over the long-term. In fact, gold prices increased by 25% in 2020 amidst economic turmoil caused by the Covid-19 pandemic. With proper research and planning, gold can be an excellent addition to a diversified portfolio.
Physical Gold Bullion
Investing in physical gold bullion, such as bars and coins, allows you to hold a tangible asset. Gold bullion is available from government mints and private dealers in a variety of sizes, valued based on the current spot price of gold. Be sure to buy only from reputable sources to ensure you receive authentic bullion.
Gold coins, such as American Eagles, Canadian Maple Leafs, and South African Krugerrands, are common options for bullion. Gold coins often carry a slight premium over the spot gold price due to the costs of fabrication and distribution. Coins offer more portability and divisibility than gold bars.
Best Gold to Buy in 2023
While gold coins from government mints are all solid options, American Eagle coins stand out as some of the best gold to buy in 2023. Produced by the U.S. Mint from gold mined in the United States, American Eagles contain one troy ounce of .9167 fine gold. The 22 karat gold content and backing by the U.S. government make American Eagles one of the most sought-after gold coins in the world.
Gold bars are another popular form of physical bullion, available in sizes ranging from 1 gram to 1 kilogram or more. Smaller bars typically have lower premiums compared to coins of the same weight. Larger bars can have substantially lower premiums but lack the divisibility of smaller bars. Popular sizes for investment are 1 oz, 10 oz, and 1 kg bars.
Investing in jewelry and decorative gold items is not ideal, as the premium paid for craftsmanship drastically increases the price per ounce. If investing in gold jewelry, buy only 24 karat pieces and be prepared to sell based only on the weight value of the gold content.
Gold ETFs (exchange traded funds) offer a way to invest in gold without taking physical possession. A gold ETF will closely track the price of gold, with shares backed by physical gold held by the fund. Popular gold ETFs include GLD and IAU, which hold billions in gold bullion on behalf of shareholders.
Gold Mining Stocks
Rather than holding physical gold, you can invest in the companies that produce it. Shares of gold mining stocks can offer leverage to gold prices. However, equities carry more risk than physical gold or ETFs, requiring research into the individual companies.
Gold Futures and Options
Gold futures contracts allow an investor to buy or sell gold at a predetermined price for delivery at a set future date. Futures can be used for speculation or as a hedge against risk. Options on gold futures provide additional leverage with limited downside risk. However, both futures and options require extensive knowledge to trade profitably.
Gold certificates represent ownership of gold stored with a bank or dealer. The certificates can be redeemed for the underlying physical gold when desired. They offer an alternative to directly owning bullion while still providing direct exposure to gold prices.
A Gold IRA functions similarly to a regular IRA retirement account but allows gold bullion to be held in the portfolio. The tangible gold assets within a Gold IRA provide key diversification from paper investments. Gold IRA accounts require a custodian to store the gold safely on behalf of the investor.
Factors to Consider
When investing in gold, be sure to account for factors such as premiums over spot price, storage and insurance costs for physical gold, and ease of liquidation. Work with reputable dealers to avoid counterfeit bullion. Consider diversifying across multiple investment vehicles to take advantage of gold’s benefits while managing risk.
With prudent planning, the addition of gold to an investment portfolio can provide critical diversification, risk mitigation, and growth potential in 2023’s uncertain economic climate. Physical gold bullion, such as American Eagle coins, offers a tangible asset with intrinsic value. Other alternatives like ETFs and mining stocks allow exposure to gold prices without direct ownership. Use this guide to make an informed decision when investing in gold this year.