How to invest in gold
Buying gold bullion bars and coins is one idea, but gold is very heavy and this is not practical for larger investment amounts and not very secure either.
Thus a fund indexed to the price of gold such as GLD on the NYSE is an easy way to hold exposure to the price of the physical metal alone. For convenience you can buy and hold GLD in any online brokerage account, and sell it when you want to at the click of a button.
Secondly, the purchase of shares in the largest global gold mining companies is an excellent way of getting exposure to gold, and depending on their hedging policies gold mining company share prices tend to move upwards more quickly in value than the price of gold, so this is a leveraged investment to a degree.
The big names are well known, and easily researched on the Internet: Newmont Mining, Harmony, Gold Corp, Barrick Gold, and Placer Dome are some major gold mining companies to consider; and the least hedged of all, so that the share price moves up and down the most with the gold price is Seabridge Gold.
Thirdly, consider buying some gold futures contracts on the new Dubai Gold & Commodities Exchange. At the time of writing December 2006 futures were trading at only a 6% premium over the spot price of gold, so if you think that is pessimistic then buy these contracts through a local brokerage.
For 2006 gold investors should consider physical gold or a gold index first, and then add a few major gold mining companies and DGCX gold futures contracts. But for real performance the junior gold exploration stocks should be considered, and these smaller capitalization firms will be reviewed in Part Two of this article.
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