Gold is a commodity that many investors treat as a haven. Its gradual but predictable increase in value is as sure a way as any to grow your wealth passively. In times of distress and emergencies, gold has also proven to be more than a reliable source of insurance.
That being said, investing in gold can be quite technical for the inexperienced. In this article, you’ll learn all the basics you’ll need to invest in the shiny metal:
Things to Know:
Gold’s ever-increasing value can be determined by its weight and the amount of pure gold it contains. The purity of the gold is usually termed karats. 24 karat gold is the purest form of gold that can be acquired. Jewelry usually consists of 18 karats or lower,
When buying or selling gold, you will be likely to hear something called a spot price. A spot price is the price of the piece/s of gold during the time it was put up for sale. That means it does not necessarily reflect the current value of the gold presently.
When buying gold, it is more advisable to do so in bits and pieces over time. You can look up current gold value forecasts to be knowledgeable of the best possible time to purchase the gold. You can purchase gold from:
- Online Shops – the cheapest and easiest place to acquire real gold but also takes more research to avoid scams.
- Pawn Shops – Often comes with a steep markup and requires you to haggle. You can find them in most major towns and cities.
- Jewelry Stores – No way ideal for the gold investment since the gold in is not pure enough and the markups can be as much as 400% more than buying gold by itself.
Why Should You Invest in Gold?
The are several advantages to investing in gold that has made it a must-have feature in any investor’s portfolio. The price and rarity of gold alone means that those who own a portion of it are ensured profits. Its rarity also ensures that as the decades pass by, Gold will only be getting more and more valuable.
Another advantage is that the value of gold is fairly predictable and dependable. It’s easy to know what you are getting for each ounce of gold. Whereas other forms of investments come with high volatility, gold offers investors something easy to rely on for money.
Since the value only seems to be increasing, gold is also used to counteract the depreciating effect of inflation on other investments too.
- Value only increases over time.
- Easy to calculate and liquidate.
- Offers an antidote to the devaluation of money due to inflation.
- Can serve as a financial backup in times of emergencies or economic strife.
Methods of Investing in Gold:
With all of that out of the way, it’s time we delve into the many different ways that you can invest in and earn from gold:
Possibly the best and most reliable form of gold investment for the long term, a gold investment retirement account sold by GoldCo or Regal Assets is an investment into physical gold that will serve as a source of funds for your later years. In a diverse investment portfolio, Gold IRAs can serve as a counteracting force to the depreciating effects of inflation on money.
This method is a form of direct ownership of gold. Bullion usually takes the form of small bars and coins that you own physically. Many think of this method first when they think of gold investment.
Though owning gold outright comes with advantages like easier calculation of value and readily available sources of cash, there are some downsides too. Owning gold means also having to spend on their secure storage either at home or in a safety deposit box. It also means buying some insurance for the gold to save you in case of theft or loss.
Gold Exchange-traded funds work the same way stocks in companies do – you essentially buy a portion of gold in the form of a gold stock known as ETFs.
They are a relatively affordable method of investment that does not require you to physically handle and secure the gold. Their low costs though also mean that you might have to settle for a lower return.
Gold Mutual Funds
Mutual Funds are easy enough to understand: they are when several investors pool together their funds and place them under a managing firm for investments. The profits will then be given to each of the investors according to their percentage of the principal invested.
Many mutual funds engage in investments into either actual gold or in stocks of gold mining companies. Some gold mutual funds deal solely in precious metals. This makes gold mutual funds another viable source of non-direct gold investment.
Wherein ETFs you buy gold stocks, in Gold Future Contracts you essentially buy contracts of future sales of gold. These are at a future predetermined price and weight. They are often used by experienced investors looking to squeeze as much profit from the rising value of gold as possible.
Stocks in Companies that Mine Gold
Even in times of recession, gold mining companies generate revenue. This means that owning a part of these companies in the form of stocks and bonds means your investment is as good as gold.
With 50% of gold going directly into jewelry making, many think that it’s a source of gold investment too. They would be wrong though since gold jewelry does not contain the same levels of pure gold throughout.
Buying gold also means that you are paying for the store’s rent, the brand name and craftmanship, and the retailer’s markup too. These can increase the price so much so that buying pure gold on its own is much cheaper. Unless inherited, gold jewelry is just too costly to buy to be a good investment.
And that was all the basic you need to know in gold investments. Be sure to go deeper into researching each of the investment types. Due diligence means being responsible for your hard-earned money before putting it into something for an extended period of time. If you keep all these points in mind, your investments are sure to be gold-standard.