How to invest in gold mining stocks?

how to invest in gold mining stocks

Investing in gold can be a little bit more challenging than investing in stocks or bonds. Investors who want to trade gold mining stocks have to trade through the futures and options markets.

To help you out a bit with the choice and the right ways of investment, we have noted below four possibilities of investing in Gold. This article will help you choose the most appropriate method to ensure the security of the principal, along with generous profit.

What is Gold?

The rare element is hard to extract from under the ground. It has been mined for thousands of years. Coins containing gold appeared around 800 B.C., and the oldest known gold artifacts were found in necropolis graves that were built between 4700 and 4200BC. Since then, it has been used as a medium of exchange as well as jewelry.

Nowadays, gold has become one of the most valuable commodities. But how can one invest in the unique and rare element? What makes gold so expensive that one ounce sells for a whopping $1,200 today?

What Makes Gold a Good Investment?

Throughout the centuries, more and more people invest in gold, but why? Gold can provide financial cover when times are tough. For example, during geopolitical or macroeconomic uncertainty. Also, in the financial markets, gold is considered to be a good hedge against inflation and deflation.

Most of all, gold is a good portfolio diversifier. The only question left is, are there any risks associated with gold investments? Unsurprisingly, like any other investment, there are risks. Any gold-related investment comes with its fair share of volatility and risk. However, investing in gold is also one of the best ways to diversify your portfolio.

Gold mining stocks

According to investors, the best procedure to gain easy and profitable returns from gold is by investing in gold mining stocks. The process is a bit circuitous but ensures that the returns are high. Why? Well, the value of the gold mining stocks is directly proportional to the value of the products that they are aiming at.

Let’s take a look at the cons of investing directly in buying gold products:

  • It will weigh the same even after ten years
  • It will bear money only after a certain period and that too without any guarantee

So, the wise choice would be to fund your money somewhere that will regulate a constant flow of returns. Besides, because you will be connected with the whole production plot of gold without any mediator in between, you can withdraw benefits as soon as the miner chooses to expand his production.

When you have made up your mind to invest in the gold mines, remember the fact that mines have the possibility of facing a downslide like any other company. There are many cases reported every year where a gold mine has shut down because of insufficient production.

Some mines are running on a loss because the employees are unwilling to work because of several factors like low pay scale, extended work hours, risks, etc. In such scenarios, as an investor, you will have to keep up with the ups and downs, depending upon the market’s economy.

Lastly, most gold mines inevitable dig out several other metals other than gold, and these too are sold extensively in the market. Therefore, investing in a few of these other metals would assist you in plumping up the rates of profit. Moreover, these metals wouldn’t otherwise be available if you are willing to pull all your resources solely into pure gold.

Let’s take the SPDR Gold Shares, for example.

SPDR Gold Shares (GLD)

This company offers investors an innovative, relatively cost-efficient and secure way to access the gold market. GLD was initially listed on the New York Stock Exchange in November of 2004. Traded on NYSE Arca since December 13, 2007, SPDR® Gold Shares is the largest physically-backed gold exchange-traded fund (ETF) in the world.

SPDR® Gold Shares also trade on the Singapore Stock Exchange, Tokyo Stock Exchange, The Stock Exchange of Hong Kong, and the Mexican Stock Exchange (BMV).

SPDR Gold Shares can be traded at any time through the trading day. However, the shares may be purchased from the Trust only in one or more blocks of 100,000 shares. (a block of 100,000 shares is called a basket).

Each share represents one-tenth of an ounce of gold. For example, if gold’s current price is $1,300 an ounce, then the Gold ETF will trade at $130 per share.

Other worth the research and time gold mining stocks are:

  • Barrick Gold Corp. (GOLD)
  • Newmont Mining Corp. (NEM)
  • Franco-Nevada Corporation (FNV)
  • Agnico Eagle Mines Ltd. (AEM)
  • Goldcorp
  • Kirkland Lake Gold Ltd. (KL)
  • Royal Gold Inc. (RGLD)
  • AngloGold Ashanti Limited (AU)
  • Kinross Gold Corp. (KGC)
  • B2Gold (BTG)
  • ALPS Sprott Junior Gold Miners ETF (SGDJ)
  • U.S. Global GO GOLD And Precious Metal Miners ETF (GOAU)
  • iShares MSCI Global Gold Miners ETF RING

Gold Certificates

Gold certificates are generated by the company from whom you intend to buy gold. In exchange for the physical gold, the company will give the certificate that stands as proof that you have invested. It also shows the amount of gold you have received in return. When choosing this investment option, the gold you have bought stays physically safe with the company under their surveillance.

In reality, there is no fixed association of the gold mentioned in the certificate. Also, the company might claim that it holds enough value to cushion all your outstanding dues. In most cases, the cost of the gold mentioned in the certificate is lower than its original price. If you are willing to invest in Gold certificates, it would be better if you put your money in the ones that are supported by the government. These Gold certificates remain understrapping protection.


According to us, investing in gold jewelry is not an intelligent alternative if you are looking forward to receiving high returns from it in the long run. Buy the jewelry entirely for the sake of its appeal. When considering the amount of gold that lasts after curating the design and storing it for years is much less than the quantity that you initially paid for. It will also, in turn, decrease its resale value in the coming years.

Physical gold

Another favorable option for investing in physical gold is through purchasing bullions, gold coins, and bars. But here are a few things for you to remember- the amount that you will invest will depend on the current value of the raw gold. However, the outcome that you will receive in the form of the physical gold will not be the same as the original. If you are buying them from a company, calculate the net amount that you will have to pay in the form of commission to the gold dealers and makers. Purchasing physical gold will anyway not endow you with any guaranteed benefit as the gross amount will remain the same all through the years. Thereby you can try buying bars, coins or bullions directly from the mint so that to have at least some assurance.

An exciting area of thought could be the question that leads us to what are you going to do after having purchased it? For example, keeping it safe in the bank’s locker will automatically bear a hefty charge at the end of each year. Also, if you are looking forward to selling it, the dealer is bound to quote you a price which is a bit lower than its actual value.

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