Exchange-Traded Funds
(ETFs) Precious metals ETFs are designed to move in sync with the price of gold. They are traded on the major stock exchanges, including London, Paris, and New York. Many investors choose this option because they feel that they have the advantage of investing in precious metals, without having to worry about storing them. However, many experts are skeptical of the amount of gold these funds actually contain and whether or not gold can be delivered to investors in the event of another global panic. We feel that ETFs are best suited for people who want to speculate on short term price movements in precious metals and not for long term investment of precious metals.
Mining Stocks and Mutual Funds
(Equities) Many analyst recommend investing in mining stocks and or mutual funds which contain a basket of these stocks. They claim the advantages of these stocks are they are correlated to metals prices closely enough, while the current long term capital gains tax on these investments are lower than that of physical precious metals. However, these stocks/funds are not physical metals. These stocks/funds are actually to be considered investments in companies that mine metals. With that being said, these stocks/funds come with other risks that have nothing to do with precious metals such as corporate mismanagement, etcetera and it is difficult to escape the impact of what a strong bear market in equities would have on their prices.
Futures, Forwards, Swaps and Other Derivative Contracts
(Derivatives) These derivative contracts can range from simple to very complex depending on the situation. A "Futures Contract" the most common and arguably the most simple derivative contract, is a contract between two parties to buy or sell an asset for a price agreed upon today for a future delivery. Futures contracts are usually traded on major commodities exchanges around the world. These contracts are highly leveraged and speculative and are best suited for experience traders looking to take advantage of short term price fluctuations in metals markets and or institutions looking to hedge large holdings of physical precious metals.
Physical Holdings
This is the tangible ownership of physical precious metals that you can maintain possession of at all times, see, feel and touch. Your physical precious metals can be safely stored at a near by safety deposit box, home or office safe, or at a depository institution. This is an option that makes it easier for a person to possess their wealth as well as pass it down to loved ones without the complications of transferring paper investments such as stocks and bonds. There are essentially no reporting requirements to purchasing physical precious metals. This type of holding gives you ultimate protection from bank failures, major credit crisis, hyperinflation, and other worst case scenarios.
