How To Safely Buy Gold Stock And Derivatives

Buy gold stock, and you will be buying into one of the most stable investments in history. Gold has been proven over many decades to behave in a relatively predictable way, moving in the opposite direction from the major financial indicators such as the Dow Jones and real estate prices. Gold has several features which make it the perfect store of value during troubled economic times. As well as its counter-cyclical properties, there is also the consideration that gold prices never move in an extreme way.

This is partly because of the huge numbers of people who buy gold with the intention of holding it through thick and thin, and partly because there are never any shocks to the supply and demand ratio. With other commodities, it is perfectly possible for a bad harvest or the sudden destruction of a seasonal crop to lead to an extreme price movement. Gold is always one of the most stable and predictable investments, but during a protracted economic depression this becomes even more pronounced.

Buy Gold Stock: The One Disadvantage

The one disadvantage of buying gold to hold so that you get more cash for gold later, is that you are responsible for the storage and maintenance of the metal. Because of the ever present threat of theft, this necessarily involves you in an insurance expense as well. This can be countered by the fact that you will be able to buy gold in an imperfect market.

Many sellers of gold jewelry, especially in a depression, are highly motivated and desperate for immediate cash. Because of this, you will be able to negotiate buying terms below the prevailing market price and buy gold stock in large quantities.

If you want to trade in gold without the problems associated with physical possession of the metal, there are many financial instruments you can use to achieve exactly that. Many of the exchange traded funds are backed by actual ownership of gold, and are therefore fundamentally safe to trade.

You will need to buy and sell at the market rate, but you will not need to pay for storage space or buy insurance. You can also trade in derivative products of the gold index, such as futures. Gold futures may not be subject to the extreme fluctuations of many others, but they still involve a huge amount of risk as you can lose more than the value of your investment.

Buy Gold Stock Options Is Another Option

A much safer way to obtain gearing is to buy gold stock options, which confer the right to by or sell the index at a predetermined rate some time in the future. With these instruments, you can never lose more than the value of your investment because you can simply let an option expire if the price moves against you.

The potential for gain is, however, unlimited at least in theory. It is still unwise to put a large percentage of your investment funds into options, so only consider this step after you buy gold stock.