Gold Stocks

A new wrinkle on the face of gold investing emerged a few years ago. It is the gold stock company. Gold stocks are promoted as an efficient means of profiting from the rise in the price of gold bullion. Investing in gold stocks vs. physical gold may not be all that it is cracked up to be. Here are a few of the pros and cons to investing in gold stock companies.

The investor does not have to store any gold if all he or she has are gold stocks. The investor, however, does not have any gold to store. The investor has stock in a company that has gold and cash, does not pay dividends, and takes the cost of storage, the cost of doing business, and their profit off the bottom line.

Gold stock companies are often promoted as giving the investor the ability to make a quick profit from the run up in gold prices. It is true that an investor could buy shares of stock in a gold company one day and sell all of the shares the next. It is also true that the investor would need to pay commissions on both the buy and the sell

These companies commonly state that "for many investors" their costs are "expected to be" lower than the costs associated with purchase, storage, and insurance of gold bullion in a traditional gold bullion account. The comparisons here are unclear. For an investor who already has a bank safe deposit box there may well be no additional cost of storage or insurance for even several pounds of physical gold. If the gold companies are talking about buying individual gold bullion coins from the US Mint then they probably are right the cost of purchase. However, the markup at the Mint is up to nearly 30% above the spot price of gold bullion. Buying ten ounces or more of physical gold from a reputable gold exchange will typically cost between 7% and 5.5% above spot price depending upon quantity. The comparison would seem to be unfair and misleading.

For a balanced assessment of the relative advantages of buying and holding physical gold versus investment in gold stock companies please contact one of our gold specialists at 1-800-300-0715. After a few questions about the investor's goals our experts can help with the decisions necessary for successful investments in gold.