We've entered a bear market. Stocks fell 20% from recent highs. And it seems the markets get more uncertain with each day COVID-19 is around. That's what makes buying gold essential right now.
The spread of the coronavirus is called a "black swan event." It's the word for an unpredictable scenario that creates a more erratic market than normal.
Well, the gloom of a word like "black swan" isn't lost on anybody right now. The CBOE Volatility Index (VIX) is up above 60.
For perspective, the VIX has barely broken 30 in the last 10 years.
What this means is, unfortunately, most people don't know what's going on. Or what's going to happen.
But let's not forget, even in times like these, there is a right way to handle your money.
The more uncertain things get, the more you'll want to look toward safe-haven assets like gold, silver, or bonds to hedge your losses as the stock market tanks.
Gold is known to have held its value longer than almost any other asset in history. People trust that it will maintain its value over time.
And if there's any silver - or gold - lining in this situation, investing in gold has never been easier.
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Let's take a look at a few different ways to invest in gold. Then, we'll tell you the best way to invest in gold in today's bear market.
If you're looking for maximum security in your gold investment, you can't go wrong with holding the physical metal itself.
This is actually the oldest form of ownership. Some cultures still keep their entire savings in physical gold.
With the physical commodity, you avoid the credit risk associated with holding a contract.
One downside, however, is that you may have to spend hundreds or thousands of dollars on a safe, insurance, shipping costs, dealer fees, and more.
Still, if you're interested in nothing other than holding gold with your bare hands, here's how you can do it. And after that, we'll show you an arguably more efficient way for you to invest in gold.
You can buy gold coins called American Eagles or American Buffalos. Eagles come in different sizes, while Buffalos are all 1 oz. and can be used as legal tender ($50 per coin).
If legal tender is not what you're looking for, you can purchase entire bars ranging from 1 oz. to more than 100 oz.
Coins and bars can be purchased from the U.S. Mint or from private exchanges. But these tend to have high markups over the spot price. That's why we recommend going straight to the bullion dealer.
We have a list of four reputable bullion dealers right here.
As an alternative to holding the physical product, you can invest in a pool or certificate. You're with a group of other investors to invest in gold more cheaply.
But this also carries more risk than holding the commodity itself. It goes back to trusting your money in someone else's vault. The bullion bank housing the gold pool may or may not go under, in which case you lose your stake.
A certificate could be less risky. You can invest in a Perth Mint Certificate with at least $10,000. This can be based in gold housed internationally, a good way to diversify.
If you're not interested in holding physical gold, you have a couple other options.
You could, in theory, purchase a futures contract, which would promise the delivery of gold at a specific agreed-upon price. With this, if the price of gold increases, the value of the contract increases.
The risk, however, is that gold could decline, and so with the value of your contract. The other risk is that your futures contract expires before you get to flip it, and you have to foot the agreed-upon bill.
There's a much easier way to invest in gold from a distance, however. No wheelbarrow required. No safe. And you can own it today...
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We mentioned gold ETFs earlier. The gold ETF to invest in right now is SPDR Gold Trust (NYSEArca: GLD).
This is the easiest, most cost-effective way to get exposure to gold. It basically replicates the price movement of gold, so you get all the benefits of owning gold without the trouble of storing physical gold.
GLD is the largest ETF backed by actual, physical gold. You can't necessarily get a heap of physical gold in the future, but that's also a load of responsibility off your shoulders.
GLD is highly liquid, easy to buy and sell. Especially in a lockdown situation with COVID-19, if you end up stuck investing from inside your house for a couple months, GLD is your best bet.
You can buy shares of GLD for $147 right now. They're up 2.8% for the year, while the S&P 500 is down nearly 24% as of yesterday's close.
Action to Take: If you're watching the market spiral and wondering how you can protect from further losses, investing in gold can be a great safety. You have plenty of options, but the SPDR Gold Trust (NYSEArca: GLD) is the most convenient way to have stake in gold from anywhere.
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