How to invest in gold

Since the start of the year, gold prices have jumped to record highs and then fallen back again.

In January, it peaked at $5,586 per ounce but has stayed below $5,000 per ounce since mid March. While gold prices tend to increase during periods of political and economic uncertainty, investors gravitate toward the precious metal through gold bars, gold IRAs, ETFs and related products to help them diversify portfolios and hedge against inflation.

There are some drawbacks to investing in gold, though. In addition to issues with security and storage if you buy the physical asset, you only make money off gold if you sell it at a higher price—there is no income from interest or dividends.

If you're interested in investing in gold, here's how you can get started.

When the geopolitical environment is tumultuous, investors look to gold as a more stable alternative. Here's what you should consider:

Gold offers diversification

As an investor, diversification can help you avoid putting all of your eggs in one basket.

A diverse portfolio can include more than just a balance of stocks and bonds: Assets like real estate, cash and gold can round things out.

"Gold historically performs well when there's a lot of uncertainty in the markets and people are looking for alternative ways to park their money and to protect their capital," said Joy Yang, head of product management and marketing at MarketVector Indexes, a provider of multi-assets and digital asset index solutions.

Economic factors, as well as domestic and international politics, play a role in the demand for gold, and can influence the price. "Historically, we see that gold is kind of correlated with interest rate peaks or instability," Yang said.

Since these factors can also affect the performance of the stock and bond markets, gold's stability can make it an excellent diversifier.

It has a long history of holding value

Gold has long been a desirable investment. "We've had centuries of gold data now to look at and how people interact with gold," Yang said.

While its spot price—or the market price for one ounce—fluctuates, gold has largely been seen as a hedge against inflation. It has also occasionally outperformed indexes like the S&P 500.

One factor that keeps the price up is based on simple economics: supply and demand. "With gold, you have to dig it out of the ground. You have to mine it. So there's a limited supply," Yang said. When demand spikes, prices rise, she added.

While gold's price isn't a constant, it is treated as a store of value that is independent, with little correlation to other assets like stocks and bonds.

A gold IRA allows consumers to invest in the precious metal while receiving the same tax benefits as a traditional IRA. Since the IRS considers gold coins and bullion as collectibles (like art or antiques), they can't be put in a traditional IRA. Instead, gold IRAs are overseen by a broker-dealer or other IRS-approved custodian. To be sure, as with a traditional IRA, withdrawals from a gold IRA before age 59.5 are subject to a 10% penalty tax.

Rosland Capital has one of the top gold IRAs on the market thanks to its transparent setup and maintenance fees. Additionally, with a minimum purchase requirement of only $2,500, is a good pick for newer investors.

Birch Gold Group scores high in customer service, providing clear information about its fee structure online. Founded in 2003, it's earned an A+ from the Better Business Bureau and an AAA from the Business Consumer Alliance. 

One way to buy gold is just like you'd buy a stock. "You can buy gold in an exchange-traded fund (ETF) rather than a bar of gold," Yang said. "The benefit of an ETF is that you're sharing the costs, it's managed by a fund issuer who takes care of the custody, storage, insurance and liquidity."

You can buy shares of a gold ETF with any brokerage account. CNBC Select previously named Fidelity as a top pick for its variety of investment options and no commission fees on many trades. Charles Schwab also stood out for its $0 minimum deposit for active investing and extensive planning tools.

If you want to buy physical gold, you could purchase bars at the same places where you buy groceries. Costco — the members-only wholesale club — sells bars for a small markup with free shipping. Walmart also sells gold bars online.

A number of reputable gold dealers also sell gold bars and coins online, alongside other precious metal options like platinum and silver. APMEX has been selling such metals online since 2000, and has a large library of educational information available to help you make the most informed purchase possible. Similarly, JM Bullion has fast shipping and an excellent reputation for customer service with strong ratings from the Better Business Bureau.

However, buying a bar can come with unique challenges, as you'll need to make a plan for safely and securely storing your purchases.

And eventually, if you want to convert the gold to cash, you'll need to sell it through a gold dealer. Both APMEX and JM Bullion buy gold from consumers and allow you to start the process online. You may also have to pay taxes on the earnings as capital gains.

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At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Joy Yang, head of product management and marketing at MarketVector Indexes.

At CNBC Select, our mission is to provide readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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