Can you buy gold, silver, precious metal bullion/bars/coins, gold ETFs (GLD, SLV) and precious metals mutual funds at TD Ameritrade and ETRADE?

How to Invest in Gold and Silver on TD Ameritrade

So, you have decided to invest in gold or silver and your next step is to figure out how to do it. There are a few important questions you need to ask yourself before making your investment. Let's go over the questions and talk about exactly how to invest in gold or silver through TD Ameritrade.

The Value of Gold and Silver

Most people know the main reasons why gold and silver can be attractive investment opportunities. Gold has been historically seen as a good hedge against inflation, due to its scarcity, and with today’s high inflation rates, this is a hot topic. Gold and silver both have many real-world uses in commerce such as in jewelry, electronics, batteries, and even medicine.

In addition to these uses, gold and silver are popular among different types of collectors for items such as coins, silverware, and historic artifacts. The combination of gold and silver’s scarcity and demand for them is where their value stems from.

Types of Exposure to Gold and Silver

When investing in silver or gold, one of the first questions you need to ask yourself is, “What type of exposure do I want?”. There are basically 2 different types of exposure to gold or silver that you can have. Direct exposure or indirect exposure.

Direct exposure is very straightforward. It's investing directly into physical gold or silver. Indirect exposure is a bit of a gray area. It's using intermediaries or investment vehicles to gain exposure to gold or silver. There are lots of different types of investments to gain indirect exposure.

Buying Physical Gold or Silver on TD Ameritrade

How exactly do you get your hands on gold or silver to have direct exposure? You have to buy physical gold or silver. Unfortunately, TD Ameritrade does NOT offer this as an option. The good news is that TD does offer plenty of ways to get indirect exposure.

Open TD Ameritrade Account


Open TD Ameritrade Account

Gold and Silver Futures Contracts

The closest way of getting direct exposure to the price of gold and silver, without buying them physically, is to trade gold and silver futures. It would take a whole separate article to even begin explaining all the details of what a futures contract is and how they work. To keep things simple for the purpose of this article, we will break down a very short explanation of a futures contract and examine the most popular gold and silver futures contracts that you can trade through TD Ameritrade.

What is a Gold or Silver Futures Contract?

The simplest explanation of gold and silver futures is they are a way to profit from the price movements of gold and silver. In more technical terms, gold and silver futures are contracts to buy or sell gold or silver at a predetermined price on a predetermined date in the future. TD Ameritrade has some amazing educational resources on their website when it comes to learning about futures so if you have questions, you should definitely check out their website.


TDA Futures Education


Gold Futures at TD Ameritrade

The symbol of the most commonly traded gold future is GC. This future is a contract between a buyer and a seller to physically deliver 100 troy ounces of gold by a certain date at a certain price. If you are buying this future, you are looking for the price of gold to go up before the contract expiration date. If you are selling this future, you are looking for the price of gold to go down before the contract expiration date.

No matter what the price of gold is by the predetermined date in the futures contract, the 100 troy ounces of gold has to be delivered from the seller to the buyer at the price specified in the futures contract. However, most gold futures contracts are never traded with the intention of reaching physical delivery. Many traders use futures as a speculative investment vehicle to try and profit from the price action of gold and silver going either up or down.

Silver Futures at TD Ameritrade

The symbol of the most commonly traded silver future is SI. This future is a contract between a buyer and a seller to physical delivery 5,000 troy ounces of silver by a certain date at a certain price. Just like with gold futures, buyers are looking to profit from the price of silver going up and sellers are looking to profit from the price of silver going down.


TDA gold futures


Risks of Futures

There are additional risks to trading futures compared to a lot of other securities. The dollar value of gold and silver futures contracts is massive because of the amount of gold or silver that they represent control of. At the current price of gold, $1,942 per ounce, a GC future would represent approximately $194,200. At the current price of silver, $24.97 per ounce, a SI future would represent approximately $124,850.

Not only do futures represent these large amounts of money, but you can also trade futures without putting up relatively much capital. Futures contracts give you the ability to trade with large amounts of leverage. Not even considering the other risks involved with futures, just the combination of huge notional value contracts along with serious leverage can be a recipe for disaster if you don’t know what you are doing.

Requirements For Trading Futures With TD Ameritrade

You have to apply to trade futures with TD Ameritrade and your account has to meet certain requirements. It’s important to note that TD Ameritrade does not allow gold or silver futures contracts to reach the point of physical delivery. If you do not close out the futures contract yourself before it reaches the physical delivery settlement date, then TD Ameritrade will close it for you.

Investing in Gold and Silver Companies on TD Ameritrade

Another question you need to ask yourself is, “Do I want to invest in gold or silver or gold and silver companies?”. Instead of the precious metals themselves, you can invest in stock of companies that participate in the gold and silver industries. These could include companies that are involved in mining gold and silver, the production process of gold and silver, the exploration of gold and silver, the commerce of gold and silver, or companies that invest in mining streams and royalties.

The only gold producing company in the S&P 500 is Newmont Corporation, symbol NEM. Newmont is the world's largest gold mining company. In 2021, they produced about 6,000,000 ounces of gold and had revenue of over $12 billion.

There are hundreds of companies to invest in that are part of the gold and silver industries so it’s best to make sure you understand how the company you choose to invest in fits into the overall gold or silver market. TD Ameritrade offers a wonderful stock screener tool that allows you to search for all the gold and silver companies in the market.


TD Ameritrade gold stocks


Correlation of Precious Metal Prices Compared to Companies

It's hard to predict exactly how the stock price of companies in the gold and silver industries will react compared to the prices of gold and silver. There could be a strong correlation between the stock price and precious metal price or a weak correlation or no correlation. This is one thing to keep in mind if you decide to go with investing in gold and silver companies.

Open TD Ameritrade Account


Open TD Ameritrade Account

Diversified Gold and Silver ETF’s on TDA

The last question you need to ask yourself that we will discuss is, “How much of a diversified investment do I want to make into gold or silver?” Investing in gold or silver ETF’s is a way to gain indirect exposure and at the same time have a diversified investment in the gold or silver industries. There are ETF’s that invest in a basket of companies that cover all areas of the gold or silver industries. There are also ETF’s that invest in a basket of companies that cover only certain areas of the gold or silver industries.

An example of a diversified silver ETF is symbol SIL. This ETF currently holds over 40 different companies that are focused on mining silver. If the price of silver has a very good day and goes up 5%, you may not see this ETF shoot up exactly 5% at the same time. With this type of indirect exposure silver investment, you are investing more in the operations and the performance of the companies held in the ETF than the price of silver itself.

Concentrated Gold and Silver ETF’s on TDA

There are gold and silver ETF’s that have very specific investment objectives and don’t offer any diversity. These ETF’s still fall under the indirect exposure category however, they offer a way to get very close to direct exposure to the prices of gold and silver. The three ETF’s we will look at here are GLD, SLV, and UGL.

Investing in GLD and SLV on TDA

You may have heard of the symbols GLD and SLV because these are the two most popular gold and silver ETF’s. If you are looking for a way to invest in physical silver or gold, then these are two ETF’s you will want to consider. The reason is because GLD is a trust that holds gold bullion and SLV is a trust that holds silver bullion. Even though you will never be able to touch the physical gold or silver, you essentially have someone holding it for you.

Investing in Gold and Silver Derivatives ETF’s

There are gold and silver ETF’s that use derivatives such as swaps, options, and futures to either track or exponentially track the prices of gold and silver. These ETF’s are generally high risk and can be difficult to understand how they actually operate.

An example is symbol UGL. This ETF basically tries to double the daily price performance of gold by using the sophisticated types of derivatives mentioned previously. So, if gold goes up 2% in a day, UGL will go up 4%. UGL does not invest in any physical gold as GLD does, but it does provide a potential way to get close to direct exposure to the price of gold.

TDA Precious Metals Investing Summary

Before investing in gold or silver, be sure to ask yourself the important questions mentioned in this article. Adding gold or silver investments into your portfolio could be a very smart move or it could be a move that might not make sense for you right now. You can use TD Ameritrade’s website to explore all the different types of gold and silver investments that we discussed.

Open TD Ameritrade Account


Open TD Ameritrade Account

Author: Paul Johnson. Updated on 4/6/2022.




Continue Reading