Gold is hovering near all-time highs. Here's how investors can play the craze.
11/02/2024 22:21
Gold and silver have been on a tear this year. Here's how retail investors can get in on the action.
Gold (GC=F) was hovering at a record high around $2,700 per ounce on Wednesday and silver was trading near 12-year highs, with the US presidential election between Kamala Harris and Donald Trump just days away and most investors expecting another rate cut at the Federal Reserve's next meeting on Nov. 7.
This week, Goldman Sachs analysts predicted gold will rise about 10% to $3,000 by December 2025 due to physical gold demand from central banks, investors pouring into exchange-traded funds (ETFs) backed by physical gold, and speculative positioning.
"History suggests that gold positioning tends to rise with uncertainty and when investors seek safe havens," wrote Goldman Sachs' Lina Thomas and Daan Struyven.
Retail investors wanting to get in on the precious metals action have several options, from owning physical gold to investing in mining companies. Here are some:
"For gold, as well as silver, buying the physical asset is the safest and most reliable way," said Alex Ebkarian, co-founder and COO of Allegiance Gold.
Ebkarian said investors should have a mid- to long-term outlook for their return on investment, as well as understand there are storage and transportation fees if the gold is stored outside the home such as at a secure depository. There is also an upfront premium cost paid during acquisition.
"When it comes to investing in bars, I suggest starting at the 1 oz with well-known brands such as PAMP Suisse, Valcambi," he said.
Physical purchases can be made from local dealers, online platforms, and even big box retailer Costco (COST), though the latter doesn't purchase any back from customers.
Buying coins also carries a premium — from the most common ones to the rarest collectibles.
"When it comes to coins, it is best to focus on products from the world’s top four sovereign mints: US Mint, the Royal Canadian Mint, the Perth Mint, and the Royal Mint. They produce investment-grade coins that are highly sought after and extremely liquid. Diversifying your holdings provides you more flexibility and options in the future," said Ebkarian.
The most popular for both gold and silver is the 1 oz. American Eagle.
"American Eagle 1 oz. coins are the most liquid, traded, and recognized bullion coins in the world. Those are in great demand,” said Scott Travers, executive editor of COINage Magazine and author of the Coin Collector's Survival Manual.
Travers said consumers should make sure coins are verified through one of the industry's main three grading agencies or buy a tester to verify them.
Another way to gain exposure to gold or silver is through ETFs that track the price of the commodity.
The iShares Silver Trust (SLV) and Physical Silver Shares ETF (SIVR) are both up about 42% since the start of the year, while SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) are each up about 34% year to date.
Global physically backed gold ETFs saw their fifth consecutive monthly inflow in September, attracting $1.4 billion, according to the World Gold Council.
"The main advantage of gold ETFs is that they closely follow gold prices, making them simple to buy and sell, and don’t require physical storage. But ETFs charge management fees, and their prices can fluctuate with market conditions beyond just the changing value of gold," Peter C. Earle, senior economist at the American Institute for Economic Research, told Yahoo Finance.
"There is a case to be made for retail investors to invest in gold and silver through mining stocks," said Warwick Smith, CEO and director of American Pacific Mining Corp (USGD.CN).
"Even with competition from critical metals like copper, gold remains everyone’s top pick in 2024 and will continue to be the best-performing asset in the commodity markets into next year," he added.
Year to date, the VanEck Gold Miners ETF (GDX), composed of companies involved in discovering, mining, and refining gold or silver, is up 33% versus gold's 29% rise during the same period. Miners have played catch-up this year as a broader five-year period shows physical gold has performed far better.
Some experts warn the tangential route to investing in gold adds an element of company risk beyond what comes with the commodity itself.
"Shares of gold-related companies carry all of the risk of adverse movements in the price of gold in addition to the risks of corporate management: operational challenges and company-specific factors," said Earle.
The largest miner, New Gold (NGD), is up roughly 95% year to date, while Chicago-based Coeur Mining (CDE) is up roughly 110% during the same period. South African Harmony Gold (HMY) is up about 85% since the start of 2024.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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