Market Overview

What Is The Best Way To Invest In Gold?

Share:

What is the Best Way to Invest in Gold?

When we look at precious metals, we see one of the most trusted and established markets in the world’s financial history.  But what many investors don't know is that there are many different ways to invest in gold that go above and beyond the traditional usage of gold bars, coins, or jewelry.  Gaining exposure to assets like mining companies or exchange traded notes and funds (ETNs and ETFs) can help to hedge positions and protect your investments from unpredictable market gyrations. 

Gold investments can be further complicated by the use of options contracts and margin accounts, so it is important to understand that these types of strategies carry extra risk and do not need to be used in order to generate consistent and long-term profitability.  One market timing service that takes a prudent protected approach is GoldPriceDirection.com, which uses an advanced trading algorithm to discover high-probability trading signals for subscribers. 

The chart above shows the results of the algorithm’s accuracy, relative to the performance in the long-term gold price.  The gains here are impressive.  Given that the past few years resulted in catastrophic losses for most in the gold market, including for leading hedge funds, there is a lot that can be said for the GoldPriceDirection verified approach.

Profiting in Both Directions

One of the reasons GPD has been able to soundly beat the performance of gold is the fact that the precious metals market can (and should) be played from both directions.  No asset ever travels straight up or down, so it is important to watch for opportunities to buy and sell as price trends change.  This does not mean that day-trading strategies offer the best approach.  In fact, there is a good deal of risk associated with short-term strategies.  To avoid these risks, the gold trading signalssent to GoldPriceDirection subscribers are longer-term, which adds the convenience of being able to monitor positions with greater time flexibility.

Investment Advantages

Relative to traditional gold investments, the approach used by GoldPriceDirection offers key advantages.  The excellent timing model allows you to affect a single hedge position, which incurs only one trade commission and tax event.  At the same time, you are able to keep your existing portfolio intact.  Additionally, it is important to remember that bullion positions are difficult and costly to enter and exit.  This often involves removing the assets from storage, transporting them, and taking a sizable financial hit when being charged dealer fees.  This type of activity also triggers potentially taxable events, which could then trigger IRS scrutiny.  If the IRS becomes interested in your gold holdings, you might be on the receiving end of unwanted questioning (How much bullion do you have?  Why are you hiding these assets?  Should we be aware of any other assets you might be hiding?)

Buying/selling a variety of positions (such as when holding shares in various mining companies for diversification) can also lead to prohibitive tax events.  Even worse, it can lead to trade paralysis -- i.e. not taking action when warranted.  By contrast, aligning yourself with a signal from a service as accurate as GPD means that you will enter into just one position.  This makes it easier to take action as all long holdings can be hedged via one single short position, for example, which at most will cause only one taxable event. 

On the whole, it makes sense for investors to consider alternative strategies when investing.  Looking back at the next few years, long and deep drops are likely to happen in gold and as recent history has shown it's very important to be hedged when those occur.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

Related Articles

View Comments and Join the Discussion!