Some investors put part of their portfolio into gold as a hedge against inflation or economic turmoil or merely for a bit of diversification. Gold is a mix of commodity, currency and insurance policy, and generally tends to be priced according to the market’s global inflation expectations. When the market thinks inflation is likely to rise, gold increases in value. When inflation is seen as being under control, gold moves backwards.

There are plenty of ways to invest in gold. The most traditional is buying gold bars and coins. The big disadvantage to owning physical gold is that it can be difficult to buy and sell in small quantities and it tends to trade with a wide spread between the buy and sell prices. You’ll buy at retail and sell at wholesale, so you’ll need a big price jump just to break even. There’s also the insurance cost; and gold doesn’t produce any income.

Australian investors have always liked to get exposure to gold through junior gold stocks, which are either exploring for gold or starting to mine it. These stocks tend to be leveraged to gold price, so when the gold price is rising they have high potential for capital gains.  On the flip side losses are magnified when the gold price is falling.  With gold stocks you’re not only assuming the risk of the gold price but also the operational and management risk of the company.

Gold funds provide a helpful alternative for people who don’t want to hold physical gold, but still want some exposure to the precious metal. These funds hold portfolios of gold mining stocks, and are seen by many as a way of diversifying the company risk associated with gold mining.

Lastly there are the exchange-traded products (ETPs) linked to gold. An ETP is similar to a fund that trades on a stock exchange like an ordinary share. The ETPs hold gold bullions as their only asset: all you’re buying is the gold price. ETPs are a very cheap and simple way of investing any amount of money in gold, with the same liquidity as a share listed on the stock exchange and a very low management fee. But like physical gold, the investment won’t produce any income.

For the more speculative-minded investors who want a simple short-term leveraged investment in gold, there are some products that you could research, such as contracts for difference – CFDs - and ASX MINI trading warrants over the yellow metal listed on the ASX.