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Types of Gold Investments
Here's a list of ways to invest in gold: bullion, coins, jewelry, ETFs (exchange traded funds), mutual funds, mining company stocks, gold accounts, gold options and futures.
Bullion, coins and jewelry give you gold you can hold in your hands. If you buy gold jewelry you pay a design premium and can often sell it only for its value by weight. You might desire jewelry 
for its aesthetic value while knowing that it also has intrinsic value, but purely for investment, coins and bullion are the better choice. Which is better, coins or bullion? Really it is a matter of preference. Bullion (gold bars) is probably cheapest, that is can be purchased for the lowest premium over the spot gold price. Also, gold bars come in sizes from 1 gram to 400 ounces. Coins usually weigh no more than 1 ounce. Coins are readily available, widely recognized and are often legal tender. Besides their value by weight, coins can also have numismatic value. However, you are then entering the realm of collectibles rather than pure gold investment and prices are then determined by factors other than economics. Some of the most common coin investments include South African Krugerrands, Canadian Maple Leafs and American Gold Eagles. Coins can be readily purchased online and at local coin dealers.
Mutual Funds. Most people are familiar with mutual funds and probably feel safe investing in them. Morningstar describes a gold mutual fund as “Funds that pursue capital appreciation by investing primarily in equity securities of companies engaged in the mining, distribution, or processing of precious metals.” Gold mutual funds are correlated to the price of gold but do not track it directly. Other drawbacks of mutual funds are relatively high administrative costs, lack of control over what the fund owns, and only being able to buy or sell at the end of day price. For more information about mutual funds you can read this article from the Motley Fool. Some gold related mutual funds include: AIM Gold & Precious Metals Inv (FGLDX), Evergreen Precious Metals A (EKWAX), Oppenheimer Gold & Special Minerals A (OPGSX), Vanguard Precious Metals and Mining (VGPMX). These are just a random selection, there are many others available.
ETFs. Gold Exchange Traded Funds trade like stocks but represent actual bullion. They are an extremely convenient way of trading bullion and have less expenses involved. When you buy bullion or coins there will be a difference in the buy and sell prices. The difference is how the merchant makes money from the transaction. With gold ETFs you pay a smaller premium over the spot gold price. Buying and selling ETFs are extremely convenient for the short term investor or speculator. However, all of the benefits of owning physical gold are lost. ETFs are subject to governmental and regulatory disruptions. ETFs are traded on the stock exchanges just like regular stocks. Trading can be halted and the markets closed. If the markets are closed, there is no way to trade the shares. Also there is no way to convert your ETF shares into physical gold; the shares represent gold, but are not convertible into gold. Two gold ETFs are streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU).
Gold stocks usually refer to stocks in gold mining companies. The value of the mining company stocks generally follow the gold price. But they don't track it precisely and there are a slew of additional factors to take into consideration. There are senior stocks like Newmont Mining (NEM) and Barrick Gold (ABX) which are large-cap, widely followed and traded stocks. Then there are junior mining company stocks which may be anything from small capitalization stocks with producing mines to highly speculative stocks that only hold mining rights to land that may never produce an ounce of gold. The benefit of mining stocks over bullion ETFs is leverage. Some stocks may be highly leveraged to the gold price. If the price of gold goes up 10%, the value of the stock could double. This is because of the cost of production may be break even at $800 an ounce, for example, but at $880 every ounce produced would mean $80 in profit. A downside to owning gold stocks is that no matter the price of gold, when the stock market as a whole turns down, the price of gold stocks, at least initially, tends to go lower as well.
Gold Accounts represent physical gold held in your name in a vault somewhere. The gold may be part of a pool or may be specifically allocated to you. The advantage to a gold account is that you do not have to worry about securing and storing the gold yourself. While there is a storage expense, it is undoubtedly much safer to have your gold stored in a bank in Switzerland than in a lockbox under you bed. In the event of a crisis or other necessity, however, having gold in New York or Switzerland or wherever may not do you any good. Two companies that offer gold accounts are Kitco and BullionVault.
Gold Options give one the option but not the obligation to buy or sell an underlying asset (typically a stock) by a fixed date at a certain price. The benefit of options is that you get a lot more leverage than simply buying the underlying shares: 1 option might control 100 shares. Also, you can only lose the total amount invested in the option. The downside is that well over 80% of all options expire worthless.
Gold Futures are contracts to buy or sell a commodity at certain price and date. While options give one the option to purchase the underlying asset, future contracts are obligations to buy or sell the underlying asset. They can, however, be offset by selling a long position or buying back a short position. Because the potential loss is greater than the initial investment, they should only be used by advanced speculators.