Bullish pattern breakouts underway on several charts.

The 'flight to safety' exchange-traded funds for U. Treasury bonds, gold bullion, and dividend-rich utilities remain viable asset allocation choices for diversified investors. NEW YORK TheStreet - It's never too late to invest in gold, no matter what the gold price. Whenever you buy gold, the first rule of thumb is dollar cost averaging -- putting a fixed amount of money towards gold every month regardless of the price. For the average investor, this strategy spreads risk out over time and lessens the downside.

Gold is protection, insurance against inflation, currency debasement, and global uncertainty. Here are four ways you can invest.

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Gold Bullion Buy physical gold at various prices: Some of the most popular gold coins are American Buffalo, American Eagle and St. You can store gold in bank safety deposit boxes or in your home. You can also buy and sell gold at your local jewelers. Other companies like Kitco. When you buy gold coins or bullion, avoid big premiums.

The higher the premium, the higher the gold price will have to rise in order for you to profit. To calculate the premium of a gold product, subtract the spot price from the price you are being quoted, divide that number by the spot price and multiply by Had you purchased a one ounce gold bar at Kitco. This means that the gold price only has to rise 2. To avoid getting ripped off you must establish why you want to buy gold bullion.

If you want to own gold as a long term investment, then buy gold as close to the spot price as possible. A good rule of thumb is to leave rare coin buying to rare coin dealers. Gold ETFs Gold exchange-traded funds are a popular way to have gold exposure in your portfolio without the hassle of storing the physical metal. First, you can invest in one of three physically backed ETFs, which track gold's spot price.

The most heavily traded ETF is SPDR Gold Shares GLD , which saw record inflows as fears ballooned over Europe sovereign debt fears and a struggling U. Big guns like George Soros and John Paulson own the stock. The newest gold ETF is ETFS Gold Trust SGOL , which launched in September This gold ETF actually stores its gold bullion in Switzerland and gives investors access to different types of gold.

If investor demand outpaces available shares then the issuer must buy more physical gold to convert it into stock. Conversely, when investors sell, if there are no buyers, then gold is redeemed and the company must then sell the gold equivalent.

Gold is a tool for investors and for traders looking for gold exposure or as a way to hedge other gold positions. The result can be rough violent price action.

Expense ratios can range from 0. The fund must sell gold, for example, periodically to pay for expenses which decreases the amount of gold allocated to each share. There are also two types of gold stored in the ETFs, allocated and unallocated.

Allocated gold is the bullion held by the custodian, big banks. Custodians provide a bar list of all the individual allocated bars daily and are typically audited twice a year, paid for by the sponsor, by an independent party like Inspectorate International. Unallocated gold relates to authorized participants like JPMorgan or Goldman Sachs who trade gold futures. Futures contracts are often bought if the trustee needs to create new shares fast and doesn't have the time to buy and deliver the bullion.

Typically allocated gold far outweighs the unallocated gold and the amounts are tallied each day by the custodian. The ETF also has a set amount of time when it must deliver the physical gold into the vault. Although baskets of shares are allocated to specific gold bars, which can be found in the ETF's prospectus, an investor must share ownership.

There is the possibility of redeeming shares for physical gold, but that arrangement is conducted with brokers and is typically more difficult. Investors have to redeem in huge lots, like , shares, not really viable for the retail investor. ETFs are also very controversial.

Gold as an investment - Wikipedia

Many complain that investors can't know if their gold really exists. Also, if a bank storing the gold fails, the ETF, aka investor, becomes a creditor. There are other types of ETFs. If you want the opportunity of redeeming your shares for gold, another option is Sprott Physical Gold Trust ETV PHYS , which is a closed-end mutual fund that gives investors the option of trading in their shares for ounce gold bars. The fund can trade at a huge premium or discount to its net asset value at any time and has higher fees, making it more expensive to invest in.

An investor can obtain physical gold on the 15th of every month, although the holder has to make transportation and storage arrangements. There are also two other ETFs to consider.

The 5 Best Ways to Invest in Gold - The Daily Reckoning

Market Vectors Gold Miners GDX , a basket of large-cap mining stocks. Gold ETNs If you want more risk, try exchange-traded notes, debt instruments that track an index. You give a bank money for an allotted amount of time and, upon maturity, the bank pays you a return based on the performance of what the ETN is based on, in this case the gold futures market.

Some of the more popular ones are UBS Bloomberg CMCI Gold ETN UBG , DB Gold Double Short ETN DZZ , DB Gold Short ETN DGZ and DB Gold Double Long ETN DGP. ETNs are like playing the futures market without buying contracts on the Comex.

ETNs are flexible, and an investor can trade them long or short, but there is no principal protection. You can lose all your money. Gold Miner Stocks A riskier way to invest in gold is through gold-mining stocks. Mining stocks can have as much as a 3-to-1 leverage to gold's spot price to the upside and downside. Gold miners are risky because they trade with the broader equity market.

Some tips to consider when picking gold stocks are to find companies with strong production and reserve growth. Make sure they have good management and inventory supported by either buying smaller-cap companies or by maintaining consistent production. Global gold production has been declining since , only recently experiencing more juice, and big miners keep their gold reserves flush by buying or partnering with small-cap companies, which are in the exploration or development stage.

Many investors make the mistake of buying small gold miners that are in the exploration phase with no cash flow. Picking among these stocks is like buying a lottery ticket, very few companies actually strike gold and become profitable. Even fewer become takeover targets. With gold prices high, gold companies can make more for every ounce of gold they produce, but their net profits depend on their cash costs; how much it costs them to produce an ounce of gold.

Those factors vary from company to company and are subject to currency issues, energy costs and geopolitical factors. CEO Mark Bristow says that the company benefits from gold prices in almost two days.

You also have to buy the right amount of gold stocks.

Doody, editor of goldstockanalyst. Investors often get too spooked too fast and wind up selling out of gold stocks at the wrong time. Action Alerts PLUS is a registered trademark of TheStreet, Inc. You are using an outdated browser. Please upgrade your browser to improve your experience. Jim Cramer's Best Stocks for Most Recent Trade Alert. Subscribe Access insights and guidance from our Wall Street pros. Find the product that's right for you.

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