Investing In Gold: How Does The Gold Market Work?

Gold can be a sound investment because its supply is relatively constant, unlike that of securities and currencies. That’s because gold mining doesn’t increase the supply of gold by much on a yearly basis. 

An ounce of gold today can buy pretty much the same amount of goods as it did 25 or 50 years back. In contrast, the purchasing power of the US dollar has reduced significantly. 

Typically, when the dollar is weak, the price of gold moves up. For this reason, investors use gold as a hedge against inflation. If you too want to insulate yourself from the effects of inflation, consider investing in gold. 

But how does the gold market work? How can you invest in it? And most importantly, is right now a good time to buy gold? 

Continue reading to find out the answers yourself. 

How Does The Gold Market Work? 

There are three key drivers of gold prices: demand, supply, and investor behavior. While that seems simple enough, these three factors may often work in a counterintuitive fashion. For example, since gold’s supply is relatively constant, it’s considered an efficient tool for diversifying a portfolio during an economic slowdown or when inflation is rising. 

How To Invest In Gold? 

There are three main ways to invest in gold. 

  1. Physical Gold 

You can buy physical gold in the form of bullion, coins, and jewelry. Most investors tend to invest in gold coins as they are universally recognized and most easily traded. 

Like other gold investments, bullion and coins are a hedge against rising inflation. But they go a step further. Since you physically own them, you have full control over your investment. They are tangible assets with which you can do as you please. Physical gold provides security during an economic crisis and can even be used as currency if the situation warrants.  

So how can you buy gold bullion? 

One option is to buy gold bullion with Gainesville Coins. Since buying gold online is easier and more convenient, most investors prefer this option. However, if you want, you can also buy gold from a local coin shop. 

Whether you buy gold online or offline, these tips will come in handy: 

  • Verify the dealer’s reputation – Review the recommendations made by autonomous sources and customers. Another option is to check the dealer’s rating on the Better Business Bureau website.  
  • Ensure the seller offers fair prices – Check the price of the gold before buying and factor in the dealer’s markup. Remember, bullion has a lower markup than coins, so you may want to invest in them. 
  • Ensure that the seller has sound shipping policies – If you’re purchasing online, make sure your shipment is secure and insured. Also, ensure the vendor gives you a tracking number when they make a shipment. 
  1. Gold ETFs

The term ‘ETFs’ stands for exchange-traded funds. That means gold ETFs can only be bought and sold on authorised exchanges. As a result, you don’t have to worry about storing them or them getting stolen. 

Also, just like shares, you can buy and sell gold ETFs multiple times during a single trading session. For instance, if you buy a gold ETF in the morning and the price rises sharply soon afterward, you may consider selling it to book profits the same day. 

Easy and convenient as it is to trade a gold ETF is, it has few drawbacks. One, you don’t actually own a gold asset. You can only redeem it for cash—not gold itself.  Two, you may have to pay a commission to your broker every time buy and sell a gold ETF. Three, any profits you make must be reported for tax purposes. 

  1. Gold Certificates

A paper document, a gold certificate represents your claim on a specified value or amount of gold. It’s issued by financial institutions and banks. Compared to the actual metal, they’re easier to exchange and handle. Just like in the case of ETFs, with gold certificates, you don’t need to worry about storing your asset or losing it.

However, gold certificates have one major shortcoming. They are just as good as the company that issues them. If the company goes out of business, you may lose your entire investment. 

Should You Invest In Gold Right Now? 

Even though gold prices have hit a nine-year high recently, investing in gold right now may be a good idea, especially given the current economic downturn. As said earlier, gold can provide financial cover during macroeconomic uncertainty and rising inflation. 


Gold acts as a hedge against economic uncertainty and inflation. It also helps you diversify your portfolio. You can buy gold in different ways. But if you want to own physical gold, you should opt for bullion and/or coins.  

Ruth Walter has been fascinated with gold ever since she was young and has spent most of her life learning about it. Today, Ruth works as a full-time writer who tackles about gold investing and other types of investments.

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