There are four ways to invest in gold.

1. Gold Mining Companies
2. Gold Exchange Traded Funds (ETF)
3. Local Gold Bullion
4. Online Gold Bullion

Gold Mining Companies

Purchasing the gold mine company stock is an excellent way to get in the gold game without being fully exposed to the ups/downs of the gold market. If you invest in a good mining company it will have growth potential (especially if gold is going up) and the ability to sustain itself through down periods. Gold mine stock, however, is still susceptible to speculators and short investors. Make sure you understand the company's balance sheet and long-term financial outlook before investing in it. At a minimum make sure you understand the company's balance sheet and long-term value.

Gold Exchange Traded Funds (ETF)

I recently stumbled across ETFs when I was trying to find a method to invest in commodities and specifically buy minerals directly. ETFs are an excellent way to directly purchase a commodity without dealing with special investment firms. Essentially an ETF is a mutual fund that you can trade like a stock through a regular investment firm. The price of the ETF share is directly proportional to the price of gold at that time. In fact, most gold ETF funds normally own gold that directly relates to the price of their shares. The benefit with investing in an ETF is that you own gold without having to worry about safely storing it. A negative with ETFs is that they are taxed by the IRS as collectibles, not like stocks and mutual funds and thus, ETFs do not benefit from long-term capital gains. After 1 year with a stock or mutual fund the long-term capital gain kicks in and the maximum tax rate is 15%, whereas with an ETF it continues to be 28%.

Local Gold Bullion

If you'd like to own gold directly there are numerous options. You can purchase gold bullion (e.g., coins, bars and other items) or purchase gold jewelry. The latter is particularly beneficial because you can own gold while still being able to use it. Personally I took the route of investing in gold coins. I found it quite fun to buy a “piece of history” and have a long-term investment at the same time. There are two big negatives with holding gold directly. First, you require a safe place to store your gold and keep it away from the criminal element, and secondly it can be somewhat difficult (and expensive) to buy and sell gold directly. You can purchase gold coins from online auction sites (e.g., Ebay), and gold bars from brokerage sites such as http://kitco.com. The greatest advantage with having real gold on hand is that you can have immediate access to it. For the paranoid, gold is a safe bet if society goes to hell in a hand basket. Some folks have dollar bills stuffed under their beds and some have gold coins. Given how the dollar has been plummeting lately I greatly prefer the latter.

Online Gold Bullion

If you want to own gold directly but don't have a safe place to store it or don't want to be charged expensive fees then an online bullion brokerage may be best for you. The concept with the online bullion traders is that they store bullion at their secure vaults. When you purchase gold it is not shipped to you, but rather stored in their vault. You can purchase more gold or sell it at anytime and they will immediately give you the $ for the current rate of gold being traded at that time. A small transaction fee will be applied (normally in 10s of dollars). The process is very fast and secure. There are quite a few online gold brokerages out there but most seem to specialize in the acquisition of gold bars/coins. One online brokerage I particularly like is bullion vault. This website allows you to buy gold directly and have it stored in one of their three vaults: New York, London or Zurich. The website is very secure, intuitive and easy to learn. One of the coolest features of Bullion Vault is that you will receive a free ounce of gold when you signup.

I hope this article has helped educate you on the different gold investment options. If you have any questions please let me know, I'd be happy to help out.