Over the years, gold has proven its reputation as a recession-friendly asset. If you want to diversify your portfolio, you can consider buying this safe-haven investment. According to JP Morgan, while gold prices could slide in the near term, the yellow metal will achieve new highs in late 2024. It could eventually peak at $2,300 per ounce next year. Here’s how to invest in gold.
Ways to invest in gold
Gold investments come in different sizes and shapes. There are five primary ways to invest in gold.
Physical gold
When you think of gold, images of jewelry, gold bars and coins may come to mind first. One way to invest in gold is to buy such items. However, keep in mind that purchasing, storing and selling gold this way can be costly and challenging.
After buying your bullion, you must keep it somewhere safe. Others keep it at home, following stringent conditions to preserve the quality. Some turn to reputable vaulting services. Once you decide to sell it, one main challenge is being able to sell it at a higher price than the original price. If you’re selling gold jewelry, you also have to consider the making charges (which can be a flat rate per gram or a percentage of the item’s cost).
Gold stocks
Like how you’re trading regular company stocks, you can also buy and sell gold stocks, usually offered by gold-mining companies. This option will give you more flexibility because you can choose which companies to buy gold from.
Investing in gold this way won’t allow you to get hold of the yellow metal in your hand. But, on the upside, you’ll be able to sell gold stocks any time you want it, making them more liquid than their physical counterparts.
Gold futures
In the world of investing, you can also trade a futures contract instead of a stock itself. In this setup, the contract refers to an agreement to buy or sell a certain amount of commodity (like gold) at a future date. You will turn a profit here if you can sell the contract for more than your purchase price. A lot of this involves speculating gold prices and betting if they will rise or fall by the end date of the contract.
Gold mutual funds
The concept of mutual funds is to pool money from various investors and use it to fund a diverse portfolio of assets. In the context of how to invest in gold, dabbling in gold mutual funds means putting your money into a professionally managed portfolio that includes a variety of gold-related assets. These include stocks and futures.
Gold ETFs
ETFs or exchange traded funds work like mutual funds. However, ETF prices change throughout the day on the stock market, while mutual fund prices are set at the end of each day based on their net asset value (NAV). Moreover, you buy ETFs like regular stocks on the market, but you buy mutual fund shares directly from the fund.
Like gold stocks, both gold mutual funds and ETFs can let you invest in gold without physically owning the metal. These funds also come with certain legal protections, though bear in mind that funds also often charge management fees.
Read: Pros and cons: Guide to investing in gold in 2024
Where to buy physical gold in the UAE
Now that you know how to invest in gold and want to buy physical ones, you might ask: Where should I buy them?
In the UAE, a leading name for gold trading, you can find various options for purchasing gold. There are bullion dealers, refineries, and jewelry shops, especially in souks.
When buying gold in the country, an important thing to consider is how much you can invest. For smaller investments (for instance, AED 15,000), you may want to approach smaller dealers. In the country, all dealers adhere to nationally set rates for precious metals, though some may add a premium. Now, for larger investments, it’s better to consult larger dealers or investment houses.
Whichever track you choose, it’s important to research the seller or company’s history, evaluate their customer service, understand their policies and market reputation, review their buyback policy and be aware of any premiums or making fees.
Among the top gold dealers in the UAE are National Bullion House, National Metal DMCC, Dhab DMCC, Gold Standard DMCC, Kaloti Precious Metals, Al Etihad Gold, Emirates Gold and Al Bahrain Jewelers.
If you’re interested in experiencing the gold market firsthand, the Deira Gold Souk in Dubai is highly recommended because it’s known for its extensive collection of gold. Other notable gold souks in Dubai include Al Raffa, New Gold Souk and Gold Diamond Park.
How to trade gold in Dubai
Investing in gold stocks, ETFs or mutual funds is often the best way to include gold in your portfolio. Here’s a step-by-step guide.
Step 1: Get a National Investor Number
If you’re looking to trade in the UAE — in Dubai, particularly — you must first get a National Investor Number (NIN). You can apply for a NIN through the DFM app or via a licensed broker. DFM stands for Dubai Financial Market.
Step 2: Choose a DFM-licensed broker
Once you have your NIN, choose a broker licensed by the DFM. Make sure to weigh their services, technology facilities, customer experience and fee structure.
Step 3: Open your account
After choosing, you can now get started by opening a trading account. You’ll need to provide a copy of your valid passport, Emirates ID, residency visa (for foreign nationals) or family book (for UAE nationals) and a bank letter or statement with your IBAN.
Step 4: Fund your account and start trading
After setting up your account, you can fund it via your debit or credit card and start trading various instruments listed on the DFM and Nasdaq Dubai. Monitor your portfolio and keep abreast of market conditions to make informed trading decisions.
Final thoughts
Gold has a long-standing reputation as a safe-haven asset. And the good news is that there are different ways how to invest in gold. Whether you’re interested in physical gold, stocks, mutual funds, ETFs or futures, numerous avenues exist to incorporate this precious metal into your investments. Each option has its own set of considerations regarding liquidity, costs and investment strategies — and it all comes down to your preference and objectives.
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