What is the best way to invest in gold? There are many options like buying bullion, buying gold coins, buying gold futures contracts, and buying a gold exchange traded fund in the stock market.
I believe the best way is to simply buy the State Street SPDR ETF with the ticker symbol GLD in your stock brokerage account or individual retirement account. It is the best in my opinion because you simply buy it like you would a stock and can quickly and easily sell it any time you want. The expense ratio for the $GLD ETF is 0.40% annually. This saves you the expense and risk of holding physical gold in your home.
The GLD ETF seeks to reflect the performance of the price of gold bullion, less management expenses. The Trust holds gold bars in secure storage and and at times issues Baskets in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets.
Traditionally gold has been a hedge against inflation and a store of value not an investment that creates returns on capital. However, gold has outperformed both the S&P 500 and various fixed income assets since 2000. It is a defensive safe haven during recessions and is also a store of value when a countries currency is being devalued during inflationary environments. On average, over the long term gold returns are near the pace of inflation.
Since August 15, 1971, gold has had a +7.65% compounded annual growth rate.
If you want to use a trend trading system for gold the 5 day exponential moving average crossing over the 20 day exponential moving average on an end of day basis using GLD backtests with a smoother equity curve than buying and holding gold when the 5 day / 20 day ema cross under is then used as an exit signal to lock in profits during trends.
Charts Courtesy of TrendSpider.com