When the market takes a turn for the worst, investors often seek out safer investment strategies that can still provide a profit during times of uncertainty. While some believe the solution is to stock up on gold bars in their basement, others would argue this isn't the smartest or most efficient way to balance your portfolio. After all, the cost of security for your gold accompanied with the prices of a storage facility when your basement fills up can add up quickly.
To reduce these costs, opportunities to invest in gold without actually holding it have become increasingly popular recently. Here are three of them that an investor might do well to consider.
3 Ways To Invest In Gold Without Holding It Physically
1. Gold-Backed Cryptocurrencies
One way to invest in gold is through gold-backed cryptocurrencies. This type of altcoin is typically backed in a certain ratio to gold. The price of the coin is seen as less volatile than other cryptocurrencies' price since it is tied to a more stable asset. The token will be, at a minimum, the same price as gold, acting as a stop-loss of sorts. However, if a given currency continues to gain momentum, the price may even rise higher than the value of gold. Gold-backed cryptocurrencies can be purchased on a cryptocurrency or precious-metal exchange such as Gold Exchange. Since not all exchanges will list all the tokens, it is important to consult the token website for further details about buying and selling each one.
There are many different options for purchasing gold-backed crypto today. With so many alternatives, investors are encouraged to review their options carefully before choosing which to invest in. This is because some of the most popular choices for gold-backed crypto aren't actually backed to gold but may be backed by a futures contract instead.
2. Futures Contracts
On the topic of futures contracts, an investor may also decide to enter an agreement to buy or sell a precious metal at a certain date in the future. Investors put down what is called a marginal deposit to confirm that they will fulfill the future agreement. Since only a small deposit is needed, many consider a futures contract an instrument of leverage. For example, a futures contract of $200,000 worth of gold may only require a $10,000 deposit. With $10,000 in the game, an investor may make a huge profit if prices increase. However, the futures market's primary function is to provide a centralized location for buyers to hedge against adverse price movements at a future date.
Investors who purchase a gold futures contract do have the option to deliver the assets in question. However, the process is often complicated and expensive. As a result, most futures contracts are never delivered, meaning the investor may never own the gold itself.
3. Gold Receipt
As the name suggests, a gold receipt is a piece of paper that is said to be worth some amount of gold in the future. This was initially done with the assumption that not everyone would redeem their receipt at the same time so that more receipts could be offered than gold in reserve. Precious metals investors may still choose to purchase a gold receipt today, although they may not be able to purchase it directly through government mints and may need to find a private one instead.
In Canada, options exist to purchase an electronic tradable receipt (ETR). Each ETR provides purchasers with direct ownership of physical gold bullion held in reserve. These amounts are not allocated at the time of receipt and instead exist within their general supply of gold.
Get Gold Going And Growing
Owning gold without physically holding it can be a great way to profit from a stable asset without any of the associated security fees. That said, with every investment, there will exist some risk. Therefore, investors must be careful to do their own research and prepare themselves for the market and the price volatility that might come along with it.
For new precious metals investors, investing in gold as part of a long-term strategy is believed to be one of the safest options for growth.
