How to Buy Gold: Two Ways to Profit From Gold’s Rise

Nearly since the days of Adam and Eve, gold has been seen as a reliable store of value.

Even today, gold is viewed as the ultimate insurance policy against inflation, deflation and the erosion of major currencies. For investors, it can also help protect long-term portfolios. It’s one of the best investments to offset losses during economic and market downturns.

One reason is gold’s limited supply.

While central banks worldwide print money at will, the supply of gold cannot be increased except through active mining efforts. Therefore, its value rises when demand for gold outstrips available supply.

Sometimes gold prices may seem to swing wildly over short periods. But when you look at prices over the longer term, you’ll see that gold maintains its value. That’s what makes it a safe and efficient way to preserve purchasing power.

Speaking of purchasing power, check out this chart…

It displays the inverse relationship between gold prices and the U.S. Dollar Index.

While gold prices tend to move inversely to the U.S. dollar, something interesting happens during times of crisis (as you can see during the housing market crash in 2008 and the pandemic crash in 2020.)

Look closely, and you’ll notice that they rise and fall together as investors seek safe assets in both cash and gold. When markets crash, the price of gold tends to rise.

That’s when gold investors see significant returns on their gold investment.

The lesson here? Buying gold can help mitigate risk during some of the worst times in the market.

The Ultimate “Hedge” Investment

Gold prices are also boosted by monetary policy.

Take the recent response to the COVID-19 pandemic…

The Fed implemented policies that caused a sharp rise in inflationary pressures including…

  • Increasing the money supply
  • Sending stimulus checks to increase the velocity of money
  • Setting extremely low interest rates.

Markets don’t like inflation or uncertainty. But these conditions set the stage for a bull market run in gold prices.

Gold also has momentum right now thanks to geopolitical tensions.

The emerging trade war between the U.S. and China, Russia’s war in Ukraine, the rising threat of global terrorism, new variants of COVID-19… all of these concerns are putting downward pressure on stock prices.

Then there’s inflation. Oil and gas prices are surging. In the past two years, the price of oil has jumped more than 50%, and gas prices have gone up more than 60%. 

It’s All About Supply and Demand

The chart below shows the demand for gold by quarter in 2022. As you can see, gold demand is on the rise, having increased in both the third and fourth quarter

In the first quarter of 2023, investment demand for gold has continued to increase.

Global supply chain shortages are also driving prices higher. These shortages have carried into 2023.

While demand for gold is on the rise,  there have been fewer and fewer gold discoveries over the last 20 years. Supply is declining.

The high-demand, low-supply environment in the gold market will drive up prices and warrant even further demand.

In short, there’s a perfect storm ready to push gold prices higher. There are plenty of market indicators that bode well for gold at the moment. Now is the best time to diversify your portfolio by buying gold.

Two Perfect Plays for Gold’s Rise

Owning physical gold is the purest play on the precious metal. But it may not be possible for all investors. That’s why we have two perfect plays for you today to take advantage of gold’s rise.

Picking up a gold ETF is the most efficient, low maintenance method for the average investor to increase their exposure to gold without purchasing the physical metal.

If you’re not familiar, exchange-traded funds – or ETFs – are a great choice for investors looking to diversify their portfolios. They offer exposure to a wide range of assets through a single security.

Lower costs are a great advantage of ETFs over mutual funds, which offer similar products with much higher fees.

Plus, ETFs offer easier, more flexible trading since transactions can take place throughout the trading day.

And the SPDR Gold MiniShares Trust (NYSE: GLDM) is the best option for investors who want to own gold without the hassles that come with owning the physical metal.

This ETF closely tracks the performance of gold through its holdings of 2.8 million ounces, or 87 metric tons, of gold, amounting to more than $5 billion.

And it comes with a o.10% expense ratio, far less than the average expense ratio of a gold  ETF, which is 0.65%.

Even better, the cost of owning this ETF is much less than the costs associated with the physical metal (like commissions, storage and insurance), making it both a cheaper and more practical option.

With around 1.5 million shares traded daily, the ETF also offers a much higher degree of liquidity than physical gold.

Owing shares of the SPDR Gold MiniShares Trust is a convenient way for investors to gain exposure to gold with lower ownership costs and more liquidity over the short and long term.

Our second play offers more risk, but has the potential for more reward. I’m talking about picking up shares of a gold miner.

And the best one to own is Agnico Eagle Mines (NYSE: AEM).

Agnico is an ideal gold miner for times like this. It operates 11 mines across Canada, Mexico and Finland and produced approximately 3.3 million ounces of gold in 2022.

In February 2022, it completed its merger with Kirkland Lake Gold. This business combination establishes Agnico Eagle as one of the highest-quality producers in the gold industry.

 The merger also lowered unit costs, improved margins; and increased gold production.

An important metric for gold miners is operating margin, and- Agnico currently has a strong 26.09% operating margin.

With growing fears of inflation and market volatility comes growing demand for gold. Agnico Eagle is an ideal choice for an investor who seeks diversification and moderate downside protection with significant upside potential.

Plus, it pays a quarterly dividend and has a 2.8% dividend yield.

In light of the recent economic and geopolitical uncertainty, gold should be incorporated into your portfolio as an insurance policy. Properly diversified investors combine gold with stocks and bonds in their portfolio to reduce overall risk.

Consider the SPDR Gold MiniShares Trust as an efficient alternative to holding physical gold,  and consider Agnico Eagle as a mining play that will produce great returns when gold prices rise, plus pay a quarterly dividend.

Thanks to the Fed’s efforts to combat inflation with interest rate hikes, and the controversy over the U.S. debt ceiling, market volatility is likely to remain.

Whether you want to preserve purchasing power for a future investment or diversify your portfolio to hedge against risk and uncertainty, gold will maintain its value for years to come.