Gold now trades at around $1,226.00 U.S. an ounce. That’s up 28.2% from $956 a year ago, but down from its all-time high of $1,261.00 U.S., where it closed on June 28, 2010.

Gold’s recent gains have partly resulted from investor fears about the sovereign debts of European countries, especially Greece and Spain. That’s creating uncertainty about the strength of the euro. These fears are prompting more investors to buy gold and gold investments, because they believe investing in gold will provide them with additional security.

We think gold could well move higher over the longer term, due to investor concern that low interest rates and large amounts of government stimulus spending will spur inflation. This could prompt even more investors to flock into gold —and drive prices up even higher.

Here are two profit-killing strategies to avoid when investing in gold. (We’ve also included our preferred approach and a top buy in gold stocks, which you can read about below.)

1. Gold futures: Rising gold prices can make trading gold futures look more attractive. However, you can only profit in future-linked deals by out-guessing other futures traders by a wide enough margin to cover commissions and other trading costs. When you dabble in commodity futures, you are betting against professionals who make a full-time occupation of studying these markets, who have better access to information than you do, and pay much lower commissions.

Most futures traders start out with a planned limit on how much they are willing to lose before they quit. In six months or so, most lose that amount, and quit trading. What’s more, because futures traders tend to trade often, a surprisingly large number find that the total brokerage commissions they pay during their trading career is close to the total losses on their commodity investments.

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2. Structured investments: Brokers sell various structured products for investing in gold and other commodities, while supposedly limiting risk. Most participants will ultimately lose money in these investments, as well. Or they will make a poor return in relation to their risk.

The difference between structured products and gold futures trades is that the losses won’t happen so quickly. In addition, more of the money you lose will flow into brokers’ fees and commissions, while you’ll typically lose less on the commodity investments themselves.

Stick with shares of gold-mining firms when investing in gold

We feel that investing on the basis of price changes for commodity investments, instead of in commodity stocks, is more of a gamble than an investment. These activities don’t earn income, but instead consume funds for storage fees, insurance and so on.

A far better way to profit from rising gold is by investing in the stocks of gold-mining companies. That way, you benefit from increases in the price of gold, and you give yourself the potential for capital gains and income. You also save on the higher brokerage fees and commissions associated with other types of commodity investments.

Even so, because of their volatile nature, we continue to recommend that gold stocks only make up a limited portion of your portfolio’s resources segment.

Newmont Mining (symbol NEM on New York), is a good example of a high-quality gold stock. We recommend Newmont in our Wall Street Stock Forecaster and Canadian Wealth Advisor newsletters.

Newmont is one of the world’s largest gold-mining companies. Its mines should be productive for decades, and its costs are coming down. As well, most of its production is in politically stable areas, like North America and Australia.

Gold accounts for about 85% of Newmont’s revenue. The remaining 15% comes from
copper, zinc and other metals. Newmont’s gold production should rise 5% to 10% in 2010. That’s mainly because of its new Boddington gold mine in Australia, which started operating in July 2009. Boddington’s reserves should last over 24 years.

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