Gold is popular among investors for various reasons, including that the commodity has characteristics that make it an advantageous alternative to standard assets such as equities and bonds. They believe gold to be a valuable asset, even though it is an asset that does not provide a steady stream of cash flow. Because the Federal Reserve's efforts to boost the economy, such as maintaining interest rates at or near zero and government spending, have caused inflation to surge to new heights, some people see gold as a hedge against inflation. Here is a look at some potential downsides associated with each of the five main ways gold may be owned.

1. Gold bullion

Purchasing gold in coins or bars might be one of the most emotionally fulfilling ways to acquire precious metal. You'll get a sense of fulfilment from looking at it and handling it, ownership also comes with some significant negatives. One of the most significant disadvantages is the need to store, protect, and insure actual gold.

Buyers of real gold completely depend on an increase in the price of the commodity to make a profit. In contrast, proprietors of a business (such as a gold mining firm) in which the company can create more gold and, therefore, more profit, pushing the investment in that business higher, can increase both gold production and profit. Because of the likelihood of paying more for a coin's collector value and its actual gold content, you could find it more advantageous to do business in bars rather than coins. (Even though they may not all be made of gold, the following nine coins are among the most valuable in the world.)

2. Gold Futures

Investing in gold futures is a wonderful method to bet on the price of gold going up (or down), and if you wanted to, you could even take actual delivery of gold. However, taking physical delivery of gold is not what drives speculators to invest in gold futures.

The enormous level of leverage you can employ is the primary benefit of investing in gold through futures contracts. In other words, you may hold a significant quantity of gold futures contracts for a very modest amount of money. You stand to gain a significant amount of money if you correctly anticipate the movement of gold futures prices.

3. Etfs That Own Gold

Buy an exchange-traded fund (ETF) that tracks the commodity if you don't want the inconvenience of owning actual gold or dealing with the quick speed and margin needs of the futures market. This is an excellent option if you don't want to deal with any of those things. The SPDR Gold Shares (GLD), the iShares Gold Trust (IAU), and the Aberdeen Standard Physical Gold Shares ETF are three of the most popular exchange-traded funds (ETFs) (SGOL). The objective of exchange-traded funds (ETFs) such as these is to replicate the price performance of gold while minimising the yearly cost ratio of the ETF. As of October 2022, the cost ratios for the funds mentioned above are just 0.4 per cent, 0.25 per cent, and 0.17 per cent, respectively.

4. Mining Stocks

Ownership in the mining companies that produce the precious metal is another way to capitalise on the growing price of gold. They believe gold to be a valuable asset, even though it is an asset that does not provide a steady stream of cash flow. Because investors may earn from gold in two different methods, this may be the ideal solution for investors. If the price of gold continues to climb, so will the miner's earnings. The miner also can increase output over time, which results in a double-whammy impact.

5. Exchange-Traded Funds that Hold Mining Stocks

You don't want to spend too much time researching particular gold firms, do you? Investing in an exchange-traded fund (ETF) could be a good idea in this case. Gold miner exchange-traded funds will expose you to the industry's most significant gold miners. Because these funds invest in a diverse range of companies within the industry, you won't suffer as much from the poor performance of any one miner. Although the diversified exchange-traded fund will safeguard you if any firm performs badly, it will not protect you from events that affect the whole industry, such as prolonged drops in gold prices. In addition, use caution when choosing a fund to invest in since not all funds are made equal. Some funds contain junior miners associated with a higher level of risk, while others have established miners.