12 Important Facts about Investing in Gold

Disclaimer: The owners of this website may be paid to recommend Goldco or other companies. The content of this website, including any positive reviews of Goldco & other reviews, may not be neutral or independent. We may receive a commission from the companies we recommend. The content of this site is informational in nature and should not be relied upon without consulting an investment professional.

Last Updated: May 17, 2024

Although nations no longer back their fiat currencies with gold, it remains a critical precious metal for society. Many people invest in physical gold because gold prices tend to stay fairly stable, and when they do drop, recovery is quick.

Financial experts estimate central banks hold around 35,000 or more metric tons of gold reserves. This amount is around a fifth of all the gold ever mined globally. Gold continues to be an essential reserve asset.

Knowing the facts about this shiny yellow metal is essential whether you are new to investing in gold coins or an old pro. It is also necessary to understand you can invest in gold in many ways, including gold mining stocks.

Key Takeaways

Top 3 Gold & Silver Companies in 2024

Best Overall
9.7

Bar Code Score Card ™

5/5
Goldco
Excellent customer service from precious metals experts.
Best For Service
9.4

Bar Code Score Card ™

5/5
American Hartford Gold
5 Star customer service, easy to work with, and a low price guarantee.
Best For Education
8.9

Bar Code Score Card ™

4.5/5
Augusta Precious Metals
Earned best overall gold IRA company of 2022 by Investopedia's most transparent.

Invest in Gold Facts

Gold and other precious metals offer many benefits to investors, allowing them to hedge against inflation and buffet market volatility. Retail investors need to realize the pure gold facts below and prepare themselves to invest wisely.

1. Gold Stocks Differ From Physical Gold

Many people invest in gold in multiple ways, the most popular being stocks. You can buy stocks from gold mining companies, but they cannot offer the freedom of physical gold investments.

Gold stocks are at the mercy of the stock market and the company. If the company fails, your stocks could be worth little or nothing.

No matter how bad the market becomes, your physical gold investments will never be worth zero. Buying physical gold will always have value, no matter where you travel.

2. There Are Many More Options Than Physical Gold

You already know there are gold stocks, but there is so much more to investing in gold. The following are the top options, depending on your investment goals and comfort level.

Gold Futures Contracts

The riskiest method of investing in gold is trading futures, sometimes called options contacts. These involve a buyer agreeing to buy a specific amount of gold at a particular price on a future delivery date.

Gold futures contracts are not for novice investors. These investments are best for experienced gold investors who understand the market because they require a bit of a learning curve.

Gold ETFs

Exchange-traded funds are another option for investing in gold. ETFs are ideal for beginner investors because they are so easy to manage. You can gain experience investing in gold without holding it with physical ETFs.

Exchange-traded funds offer a mixed bag of investments, including stocks in mining companies and gold funds. These investments follow the price of gold, allowing investors to cash in when prices rise. You should consider an SPDR gold shares ETF and gold certificates to diversify your investments.

Gold Stocks

There are multiple types of gold stocks, including gold miners, gold production, and gold streaming and royalty companies. Mining companies like Barrick Gold Corp sell stocks that investors can use wisely in their investment strategy.

3. Physical Gold Is Taxed Like Collectibles

If you hold gold at home or in a safe deposit box, the IRS will tax it like collectibles. The profits on collectibles held less than a year are taxed as your regular income. Should you hang on to your gold holdings longer, they will be taxed up to 28%.

Many people do not realize the tax implications of investing in gold holdings. Talking to an experienced financial advisor before investing in gold content is wise. Understanding the IRS rules for exchange-traded funds, ETFs, and other asset classes will help you avoid unwanted surprises in the form of outrageous tax bills.

4. Diversify Your Investments

In some cases, gold mining company stocks can outperform the price of gold, depending on the company's success. As with any stock purchase, there are risks. When considering gold mine investments, look for companies with the following:

Research carefully when investing in gold mines. Choose a mining company with a solid track record so you are less likely to lose money.

You can buy stocks without a brokerage account, though you should not discount them in your efforts to invest in gold. A broker is sometimes helpful, especially when you first get involved with investing in gold stocks.

5. Gold Typically Inverses the United States Dollar

Many people invest in gold because it is not tied to the stock market or the United States dollar, but there is a relationship between them. When the dollar is faring well, gold declines occur. When the dollar declines, gold prices rise.

Gold price appreciation occurs as an inverse to the dollar. Watch the dollar to determine whether you will see rising or falling prices in the gold market.

Gold is an inflation hedge. With the rising prices of inflation comes a devalued dollar. Sophisticated investors know gold to be a safe haven investment during economic turmoil.

Gold historically rises in value during market downturns, so people pursued gold holdings during the Great Depression and throughout history. People often turn in their paper currency and buy physical gold as a more reliable store of wealth.

6. Gold Prices Determine When It's Best to Buy

You must become familiar with the spot price of gold. Some apps can allow you to stay up-to-date and receive alerts when the spot price reaches your predetermined price. The goal is to buy when prices dip and sell when they rise.

Some people wisely work with a financial advisor initially to help them know when to buy or sell. Being mindful of spot price changes will help you when holding gold to see a return.

7. Gold IRAs Offer Tax Advantages

Precious metal IRAs are special retirement accounts that offer tax advantages to investors. These are sometimes called self-directed IRAs because they allow you to invest in precious metals.

There are specific rules in place you must follow as an investor of precious metals. Traditional IRAs allow you to take tax deductions on contributions. ROTH IRAs allow you to take deductions on withdrawals.

A self-directed gold IRA gives you complete control of your investments, but drawbacks exist. One disadvantage is the storage. The IRS mandates that investors cannot store gold at home. You must keep your IRA gold in an IRS-approved depository.

There are costs for storage and insurance, which are not a part of other assets. You also will not have immediate access to your gold funds. It will take longer to be granted access without penalties, and there may be required withdrawals after a specific age.

8. Historical Value Can Drive the Price of Gold Coins

Unlike other assets, coins often have a historical value that can make them worth much more. Three things factor in when we are talking about the value of gold coins:

  1. Mintage number
  2. Grade
  3. Demand


The mintage number supersedes the year of a coin. Age alone does not make a gold coin valuable or any coin. The mintage number indicates how many were made. Coins with a low mintage are more likely to be valuable.

Certain coins are always in demand. A prime example is the Morgan Dollar. Some coins are never in demand and are only worth their melt value. Other coins are cyclical. Cyclical coins go up in value and then reach a certain level and begin to fall. Examples of cyclical coins include mercury dimes and buffalo nickels.

Some coins never gain value, no matter their age. Peace dollars are one of these coins. Collectors may see Peace dollars and automatically think they are a wise investment, but this is incorrect.

The following are the most valuable gold coins:

9. Scammers Can Make Fake Gold Look Real

You must be careful to avoid fakes when buying gold bullion. The ping test is one of the oldest tests for checking for fake gold bullion. Strike the coin against another coin or hard object. It should make a distinctive ring that differs from other precious metal coins.

It is also important to note that gold is not magnetic. If you see a coin attracted to a magnet, it is not real gold. Be very careful when buying gold bullion. Select a reputable dealer to avoid fakes.

10. Gold Does Not Provide Passive Income

Unlike stocks, physical gold does not provide investors with a passive income. You will only earn money on your gold investment with appreciation, and it can take years of waiting to see a return.

It is wise to couple gold investing with stock investments. Hold your physical gold until appreciation or retirement, and consider gold certificates and other assets to diversify your investments.

11. Investing in Gold Comes With Risks

Gold investing comes with risks, and anyone who tells you otherwise is likely scamming you or is misinformed. The World Gold Council warns that while gold is an excellent investment asset, it should not be taken lightly.

The following are some of the risks that come with investing in gold holdings:

For most people, the advantages far outweigh the negatives when they buy gold. As an investor, you must weigh the positives and negatives to determine your risk comfort.

Financial advisors advise investors to invest 5% to 10% of their investments in gold. You can always invest less or more, depending on your risk tolerance.

12. Gold Jewelry Is Not Always a Good Investment

Some people think investing in gold jewelry is a sound option, but usually, this is not the case. Gold jewelry tends to offer poor returns. You likely will not earn as much as the cost you paid.

Often, people buy jewelry because of its sentimental value. Unfortunately, gold jewelers often have high markups, so you pay more than the gold is worth. Some jewelry pieces are only as valuable as their melt value.

Most seasoned gold investors agree avoiding gold jewelry investments is wise. Should you decide to invest in gold jewelry, make sure it is from well-known designers. Precious gems can up the value of gold jewelry and help you receive a greater return.

If you have old gold jewelry to sell, remember that it is unlikely worth what you originally paid. Never accept the first offer you receive for gold jewelry. Make sure the dealer is not weighing all the gold pieces together for their value.

Which Are the Most Reliable Gold Dealers?

Once you decide to invest in gold, you need a reputable dealer. Not all gold dealers are created equal. Unfortunately, there are scammers out there who would like nothing more than to take your money and run.

We advise you to research your options carefully. Learn about the track record of the company. Who owns it? What kind of customer service rating does the dealer have?

Check the Better Business Bureau and Consumer Business Alliance for customer reviews and complaints. If there are many poor reviews, look for other options. We recommend the following gold dealers because they are the best in the business and the most trustworthy.

  1. American Hartford Gold
  2. Goldco
  3. Augusta Precious Metals
  4. Birch Gold Group
  5. Noble Gold


These companies offer extensive services to help people with their gold investment strategy. They partner with the best custodians and depositories in the industry so you can invest in a gold IRA.

Bottom Line on Investing in Gold

People are investing in precious metal options like gold in record numbers. Although there are risks to gold investments, most people find the advantages far outweigh any negatives.

Gold investments diversify your portfolio and help you allocate some funds for gold, silver, platinum, and palladium. You can invest in gold through a gold IRA and receive tax advantages.

Many options are available, but you must educate yourself and ensure you are prepared. Consider the companies above to get started. American Hartford Gold and Goldco offer outstanding customer service that remains the focus in everything they do. They will happily help you determine the best approach to your gold investment plan.

Top Rated Gold & Silver Companies in 2024
Best Overall
9.7

Bar Code Score Card ™

5/5
Goldco
Excellent customer service from precious metals experts.
Best For Service
9.4

Bar Code Score Card ™

5/5
American Hartford Gold
5 Star customer service, easy to work with, and a low price guarantee.
Best For Education
8.9

Bar Code Score Card ™

4.5/5
Augusta Precious Metals
Earned best overall gold IRA company of 2022 by Investopedia's most transparent.
4
7.9

Bar Code Score Card ™

4/5
Birch Gold
High level of customer service and a solid reputation
5
7.0

Bar Code Score Card ™

4/5
Noble Gold
High level of customer service and a solid reputation