Why buy gold stocks?

By | March 18, 2022

There are

many benefits to buying gold stocks instead of the physical metal. Gold companies can potentially achieve higher total returns than investing in physical gold. That’s because these companies can expand their production and reduce costs. Investors can invest in gold through exchange-traded funds (ETFs), buy shares of gold mining workers and affiliates, and purchase a physical product.

These investors have as many reasons to invest in the metal as there are methods to make those investments. Investors have three main options besides buying gold coins or jewelry. You can buy gold stocks individually. You can buy an ETF that tracks gold stocks, such as the GDX Gold Miners ETF.

After all, an ETF such as the GLD ETF, which tracks the price of gold, allows them to invest directly in the precious metal itself. Investing in shares of companies that mine, refine, and trade gold is much easier than buying physical gold. As this means buying shares from gold mining companies, you can invest through your brokerage account. Gold has been a valuable asset for centuries.

Throughout recorded (and unrecorded) history, gold has been used as a currency and a symbol of wealth and power. Gold was found in burial sites that were buried alongside remains that date back to 4,500 BC. BC, C., E. Some of this is no surprise. After all, gold mine stocks are still stocks.

Your prices should therefore correlate more with share prices than gold bars. However, gold mine stocks ultimately move with the price of gold, just as coal mines thrive with rising coal prices. As a result, gold mine stocks do not move closely with the entire stock market. When you invest in gold mutual funds, you own shares in several gold-related assets, like many companies that mine or process gold, but you don’t own the actual gold or individual stocks yourself.


VanEck Vectors Gold Miners ETF (GDX), which tracks a basket of gold stocks, popped up on the 17th. June through its 200-day line when the GDX dropped by almost 11% in the week of the Fed meeting. At the beginning of your research, you may discover that you have the opportunity to invest in gold stocks or physical gold (gold bars). Gold and gold stocks rose in the weeks following the coronavirus lockdown as the Federal Reserve and Congress uncorked a wave of liquidity and fiscal support. Physical gold often rises in value when the stock market is doing poorly, but that doesn’t apply to gold stocks.

Just like buying a single stock, buying shares in a gold mining company involves some risk, but it means you have complete control over which specific companies you invest in. Depending on your own preferences and risk appetite, you can invest in physical gold, gold stocks, gold ETFs and mutual funds, or speculative futures and options contracts. While owning gold sounds cool and can even be considered responsible during a stock market downturn, investing in gold comes with some unique challenges and doesn’t always go the way you might expect. But it’s much more about whether you should invest in physical gold or gold stocks.

To buy a gold stock or gold fund, you’ll need a brokerage account that you can open with an online broker (here’s a step-by-step guide to opening a brokerage account). The VanEck Vectors Gold Miners ETF (GDX), on the other hand, is a passively managed fund that tracks an underlying basket of shares in gold mining and refining companies. But democratic victories in Georgia triggered a sell-off instead of reaching new highs for gold and gold stocks. That could actually be better for gold stocks and the price of gold at this point in time than higher inflation values.

Investing in gold shares avoids this risk because buying stock insurance isn’t particularly common. Gold stocks work like other stocks. Essentially, you invest in companies that mine or own gold on your behalf.