Gold has been trading above $1,700 an ounce for the past year, after years of trading in a narrow range around $1,200 an ounce. While gold is not a strategic asset class, there are tactical reasons to consider investing in it now. Three options are presented by Morgan Stanley’s analyst team.
“Investors may have to pay a premium over gold’s spot price. Morgan Stanley does not have physical possession of the gold. Typically, there are storage fees. If investors wish to store their gold themselves, they can take delivery of actual gold. Delivery fees would apply in such circumstances.”
Gold is also available through some mutual funds and exchange-traded funds. The value of pure-play investors follows the price of gold. The fund bears the cost of storing physical inventory and passes it on to investors as part of the expense ratio. There are various disadvantages: Because some gold funds are classified as collectibles, they are not eligible for the lower long-term capital gains rates that apply to stocks. They also don’t generate any revenue, so the expenditure ratio can eat away at the principle each year.”
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Investors can gain exposure to gold mining firms through the purchase of individual stocks or as part of a mutual fund. ‘Mining firms are more volatile than real gold,’ says Michael Jabara of Wealth Management’s fund due diligence group. The mining industry typically tracks the price of gold, but individual equities may suffer company-specific risks, according to Jabara.”/n
