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Gold: Currency or Commodity?

Jan 16 2012

English: gold bar 400 ounces, sample at the Pr...

Image via Wikipedia

The best way to buy gold depends on what an investor is looking for, but there are several options that can be chosen. Gold has been used to store value for centuries, and it offers buyers a great way to realize a profit while minimizing risks. More traders are choosing to include gold in their portfolio, and they have worked to develop the best way to buy gold. Gold can be found as a currency, for example, as many coins are offered to traders, and gold bars are sometimes made from this material. Investors can also buy gold by the ounce, or they may choose to purchase stocks that follow the gold market.

*Currency

Currency is probably the least pure way to purchase this precious metal for an investment, and it is usually much more expensive than when a person buys the raw metal. An example of this type of purchase is when a person purchases coins that are made from the material. This will cause a markup that is unnatural and affect the price that is paid. This is ideal for coin collectors and numismatists but not for investors.

*Mutual Funds

Mutual funds are another way for a person to take advantage of the benefits that precious metals offer. These stocks contain a set amount of precious metals, and they move according to the value of the products. This eliminates the issue of what a person is going to do with the several ounces of gold they buy.

*Gold by the Ounce

Gold can also be purchased by the ounce, and this offers the purest form for true traders. The first thing that consumers should know is that when they buy the metal in this form, they will automatically be losing money. Most brokers charge a percentage for the purchase, and this may cost a consumer in the neighborhood of 2%. This means their precious metal has to increase in value by this much just to break even. Buyers have several choices of what to do with their metal, and some people actually leave it in their home. A safety deposit box in a local bank is a better choice, and there are other firms that will hold this product for their buyers.

*Mining Companies

Another option for those who wish to take advantage of the gold market is to purchase shares in one of the major mining companies. These firms own the mines where the gold is located, and they produce a certain amount of the material every year. Most of their properties include a known amount of this precious metal, and their supplies are relatively stable.

The best way to buy gold depends on the individual who is making the purchase, but there are several methods that traders can take advantage of this precious metal. Advantages of this type of purchase include the fact that the metal is highly liquid. Values have been consistently rising for thousands of years, and this is a relatively safe place to put capital. Choices run the gamut, and traders can buy raw gold, currency, stocks or mutual funds that own a set amount of the material.

Mitchel Gavillion is a financial trader and stock analyst, as well as a freelance writer who can advise people on the best ways to buy gold.

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