How to Invest in Gold and Silver – 2020

So you’ve decided to take the plunge and put your money into precious metals. What is the next step? Should you invest in paper gold rather than physical gold? Should you invest in bars or coins? What percentage of your total investment should be placed in gold or silver? If you invest in physical gold or silver, should you keep it at home, in the bank or at a private vault? Would it be better to invest at the companies who produce gold?

These are some of the many questions investors have actually asked themselves when they decided to invest in precious metals. My aim in this post is to let you know what is the best option to the investor according to my opinion.

What to Do Before Investing in Gold or Silver

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Before you go ahead with your investment in gold or silver, there are certain actions you need to undertake, if you want to ensure your investment is safe. After all, investing in gold, is just an investment, and requires money, many times the savings of a lifetime.

Gold is just an investment, an investment that can be profitable under the right circumstances. An investor must never be passionate, must always keep a cool head, because gold in a certain environment tends to do well, and in other market environment tends not to do well. The investor will have to examine whether, this is the right time to put his/her money on gold or not to.

Reasons to Invest in Gold and Silver

There are several reasons to invest in gold. The most important are: a) to protect and preserve wealth from unexpected events. b) a hedge when the stock market is not expected to do well.

To an ordinary person a good reason to invest in gold is when paper money is worthless. That has happened several times especially in the seventies when due to high inflation, paper money even the dollar lost its value dramatically. Low or negative interest rates, is also another reason for an ordinary person to preserve his/her wealth.

What Type of Gold Investment

There are two types of gold investment, physical gold and paper gold. Physical gold is tangible, jewelry, gold coins and gold bars. While paper gold consists of the E.T.F.’s, gold exchange traded funds, or gold related equities in the stock market. The later is risky, as there is no guarantee that the fund holds the amount of gold it claims.

Why Should Your Portfolio Include Gold

Gold is the best way to diversify your assets. When the price of gold moves the opposite way of other types of investments, it balances out your returns when the other investments perform badly.

How Pure Your Gold Should Be

Pure gold 100% is too soft, therefore it is mixed with other types of metals, (silver, copper, etc) to improved its strength. Based on the content of gold, it is divided in Karat configurations. 9K(37.50%) 14K(58.33%) 18K(75.00%) 22K(91.66%) 24k(99.99%) Make sure you are getting what you paid for.

What is the Real Price of Gold

Just like anything else, supply and demand determines the price of gold. Other factors include: Interest rates, inflation, political instability, stock market prices, and currency prices.

Where You Should Buy Physical Gold

In many countries you can buy gold directly from the bank. You can also buy gold coins or bars online, after you find a credible trader.

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When is the Best Time to Invest in Gold?

Although, there has been times when the gold market was bullish and thousands of investors made a lot of money, investing in gold should not be seen as short term investment, because it is not, it has never been and it will never be. For the long term investor, it is always a good time to invest in gold.

However, the investor still has to do his homework before he goes ahead and places his money into gold. Gold is on a long term upward trend, and there will be times when correction will be knocking on its door. Therefore, there is no need to panic if the price dips 5% in one month.

Buying gold at uncertain times, is also a must. The investor should always be on the lookout for major news and announcements from financial institutions such as banks, the government, Wall Street etc. Negative economic and political messages including debt, currency, unemployment, create unrest particularly in the world’s largest economies such as the US, China and the Eurozone.

How to Invest in Gold

In the old days there was only one way to invest in gold and that was only by acquiring gold itself, mainly in the form of jewelry and gold coins. During the centuries there has been many changes and nowadays, the investor faces a very difficult task, due to the fact that there are many options available. In this page, I intend to inform the investor on the ways he, she, can actually invest in the safe heaven gold.

Direct ownership, in my opinion, is the best way to invest in gold. Why? There is nothing like pure gold in your hands, it is certainly better than money. Its value cannot be changed or controlled by governments and that is the reason for governments to go off the gold standard.

Gold can be used as currency no matter where you are, and the owner could have a great advantage during hard times. The only disadvantage to owing gold, is that it tends to tray with a wide spread between bid and asked prices, so don’t expect to turn a fast profit. You should not view gold as a speculative asset, but as a defensive asset for holding value. Since your dollars, euros, pounds, etc. are going to fall in value, gold is the best place to preserve value.

Bear in mind If you live in a European Union country gold is V.A.T. or G.S.T. exempted, this is a great incentive. For any other taxation issues my advice is to have a word with your tax adviser as taxation policies vary from country to country, or even state to state.

Should I Invest in Gold or Silver?

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Many investors wonder what is better to own, gold or silver, in my opinion the best is to own both. Although gold is the ultimate insurance and protection against uncertain economic times, silver is a more speculative investment. As a result, silver can offer substantial profits.

Investing in Gold Bullion Bars?

A gold bar, is a quantity of a fine metallic gold, that is manufactured by a bar producer meeting the exact standard conditions, such as labeling and record keeping.

Bars are the most traditional way of investing in gold. In many countries they can be bought directly through banks. Bars are available in various sizes, 12kgr, 1kgr, 100gr, 50gr, 10gr, 1gr, etc.

The standard gold bar held as gold reserves and traded as such by the central banks, is the 400-troy-ounce. (12.400 or 438,9 ounces). The 1000gr bar or the kilobar, is the most popular bar among investors, and it is used extensively for trading and investment. The premium of these bars when traded, is very low over the spot value of the gold, making it ideal for small transfers between banks and traders.

Nevertheless, bars purity must be 99.5% (24 karats) at least, whereas there is a number of manufacturers producing bars at 99.9% purity.(24 karats too)

Investing in Gold Bullion Coins?

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Bullion coins are coins made out of precious metals with one purpose only, that of investment or store of value, rather than used in day to day commerce. Many countries have their own bullion coins such as the British sovereign, produced by the British, the American Eagle series of coins available by the U.S. mint and many others.

Bullion coins are produced in many weights. They are usually in fractions of one troy ounce, but some bullion coins are produced in very limited numbers in kilograms or more. Bullion coins are usually available in gold and silver, with a couple of exemptions, (the Krugerrand, and the Swiss Vreneli) which can only be found in gold.

Bullion coins are priced according to their fine weight plus a small premium, based on supply and demand, as opposed to numismatic gold coins, which are priced mainly by supply and demand, based on rarity and condition.

Bullion coins sell, for a premium over the market price of the metal on the commodities exchanges. This premium is due to an underlying demand for bullion coins, their small size, and the costs of manufacture. In addition, the amount of the bullion varies depending on the coin’s type, the weight, and the precious metal.

Gold IRA Investment

A gold IRA investment is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.

There are four precious metals allowed to be held in an individual retirement account, and these are: gold, silver, platinum,  palladium. Certain criteria is required for precious metals, in order to qualify as precious metals that can be held in an IRA.  The precious metals coins and bars, must meet IRS fitness standards and must be held by the IRA trustee, rather than the IRA owner.  Gold must be stored in an IRS approved depository. In particular, investors do not have to stash gold bars or coins in their homes or closets.

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Should I include gold in my retirement plan?

Gold is the type of investment that can protect when times are hard and at the same time will also offer significant gains to your nest egg.  Back in 2001, an ounce of gold cost $271,00.  Ten years later it reached $1896,00, an increase of almost 700%.   During that time, banks and currencies collapsed, the real estate market collapsed, but the price of gold didn’t.  In particular gold fed from these calamities, it was the rediscovered idol, in the time when everything else collapsed, from mortgages, stocks, credit default swaps, and derivative products, all was too complicated to even understand.

As you can see, a standard IRA, an IRA invested totally in stocks bonds and other funds, is actually putting your hard earned money at risk.  You are relying on government, weak currencies, economies and large corporations.  Gold and silver can actually safeguard your investment.

Since the 2008 financial crisis, gold IRAs have become very popular. Record gold sales, combined with the appearance of many more, that simplify the transaction, have made investing in an IRA a one shop stop. The result is a robust IRA growth.

Nowadays, it is absolutely necessary for the investor to invest a portion of his/her savings in gold, as the dollar is still weak, there is geopolitical uncertainty, the country’s (US) trade deficit is out of control, and the potential inflationary impact of the Federal Reserve’s, stimulus programs.

How does it Work?

It works the same way as a regular IRA account, however instead of holding paper assets, it holds physical bullion coins or bars.

Finding a reliable IRA broker.

It is imperative for the investor to find a reliable IRA broker.  Choosing the right firm can mean success or failure as a gold owner.  Choose the right firm and it will help you protect your assets from economic uncertainties.  Choose the wrong firm, and your funds can be directed to an assortment of bullion related investments, investments that are not truly asset preservation vehicles.  For example, gold stocks, gold exchanges traded funds, and mint state and proof coins graded by independent services, put the buyer at a disadvantage either by selling for high mark-ups, or by putting the whole investment at a systemic high risk.

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Check out the comments regarding the firm especially the complaints, see how these complaints were handled.  If the there is a long list of complaints, then this is a sign to worry.  Also check the number of years the company operates, you want ten years of solid record.  Finally most important is to choose a firm with a commitment to keeping you informed.  Keeping you informed now and in the future.

In the past, the whole process was complicated and was mainly done by phone.  Today, with the advancement of technology and many more, you can choose a gold broker online and automatically, be assigned an IRS approved custodian.  A custodian’s duty is to oversee the whole operation, from application, to funding/rollover, purchase, and vaulting.

Remember gold IRA’s require special expertise to value. Although gold has the potential of high returns it is easy to be blinded by its glitter. If you are considering a gold IRA my advice to you will be to consult a financial adviser. He will determine how gold would fit with the overall goals of your portfolio.

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Other Ways to Invest in Gold

Gold options and futures currently trade on various exchanges around the world and over the counter directly in the private market. They are suited to the sophisticated and experienced, who can speculate on price movements in either direction. The risk is high, so the profits and losses too.

The companies that produce the gold itself as shares in gold mining companies. If the gold prices rise, so will the profits of the gold mining companies and as a result, the share price will also rise. However, there are certain risks here an investor has to take into account. Mines are commercial enterprises, with problems such as flooding, subsidence, structural failure, mismanagement, negative publicity, nationalization, theft and corruption. Such factors can lower the share-value of mining companies.

Gold Exchanges Traded Funds (E.T.F.s) They are a very interesting way to invest in gold. An E.T.F. is a type of mutual fund, that trades on stock exchange like an ordinary stock. The E.T.F.’s exact portfolio is fixed in advance and does not change, therefore the E.T.F. holds gold bullion as its own asset. E.T.F. offers a practical way to invest and hold gold.

Choosing the Right Gold Broker

Choosing the right gold broker is always a difficult decision. It doesn’t matter where an investor is prepared to invest, it is absolutely necessary to research and make sure his/her hard-earned money doesn’t go to waste. In order to ensure the above and at the same time maximum earnings, it is important for you to read this page.

Check out the comments regarding the firm especially the complaints, see how these complaints were handled. If the there is a long list of complaints, then this is a sign to worry. Also check the number of years the company operates, you want ten years of solid record. Finally most important is to choose a firm with a commitment to keeping you informed. Keeping you informed now and in the future. If a sales person gives you a short shrift, or hits you with a high sales pitch, then this is bad news.

LBMA Members

The LBMA , London Bullion Market Association is the competent authority for the world bullion market, and it is overseen by the bank of England. It is imperative for the bullion to be produced by an LBMA approved refinery. This way, the gold bullion coins or bars are meeting the standards set by the LBMA. In a few words you are getting what you’ve paid for.

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Direct Storage Outside the Banking System

Storage of bullion should be outside the banking system, this way the possibility of confiscation due to bank bankruptcy (bail-ins), or government confiscation is eliminated. Storage should be direct to clients name with no intermediates. This way there is no risk of the investor loosing his/her investment, in case the broker goes bankrupt. The investor should be provided with a storage certificate by the independent storage company.

Buyback, Shipping, and Pickup Services

The gold firm should be able to provide the client with several but important services that include: a buyback service a pickup service, and a shipping service as many clients would prefer their gold kept at home. At the same time it is important for the dealer to be accessible to its clients questions and queries, and give answers and solutions promptly.

Gold Bars or Gold Coins?

Before we examine what is better investment gold coins or gold bars, we must remember one thing. Any type of precious metal bullion is a better investment than paper currency.

Gold bars are suited to the serious, large scale investor who wants a simple and efficient way to invest in gold. The larger bars are always available at the lowest premiums over their intrinsic gold value, smaller bars tend to cost substantially more.

On the other side, it is difficult to sell a 1 kilo gold bar as most investors are not familiar with gold bars, and you will need to find a larger dealer, as finding a private buyer is going to be a difficult task.

Gold coins is the type of investment suited to the smaller investor. I personally prefer to invest in ounce gold bullion coin, rather than an ounce gold bullion bar, as coins are massively produced and can be purchased at very competitive prices, compared to gold bullion bars.

The quality of gold coins is also guaranteed by the government, rather than a private refinery. At the same time, coins are very easy to resell. Many investors, only examine the premium price, (the percentage over and above the current gold value at which an item trades) when they buy gold, but do not realize that coins can have a premium at the time of sale, which is can be beneficial to the seller. A premium price can vary from 1% to 10% or even more.

Older coins, such as the British sovereign carry a higher premium, rather than a modern coin such as the Krugerrand. At the same time a large scale investor, who will actually invest in a large number of coins will actually pay a small premium.

My recommendation for the large scale investor, is to invest in gold bullion bars, as bullion bars is the most efficient way to invest in gold. Bare in mind, I am not talking about 1 ounce gold investment but I am talking about 1 kilo investment.

A smaller investor is better of investing in gold bullion coins, preferably older coins such as the British sovereign, as the sovereign carries a high premium. In addition, coins are easy to resell.

Storing your Precious Metals

Storing gold could be an headache for the novice investor. What are the options and which option is the best? Basically there are three options to store gold.

1-At home (in a safe or well hidden) 2 -In a bank’s safe deposit box 3-In a private storage firm

There are pros and cons to all options, but home storage or a private vault are the best options. Before we analyze those two options, I will have to explain why the bank’s safe deposit box will have to be excluded.

Storing Gold in a Bank’s Safe Deposit Box

Banks do offer excellent level of security and peace of mind, but storage fees can be high, as they can range from $100 to $500 annually. Accessibility is another issue, as the investor can can only have access to his gold, during business hours, which coincide with most people’s work schedules. Also, investors will not be able to access their gold during public holidays. These restrictions can cause large problems in the event of national emergency.

A gold investor puts his money into gold, to protect himself from the risks associated with the fragility of our financial system. To buy gold and then store it in a bank safe deposit box, will be at least inconsistent because, storage of bullion in a bank’s safe deposit box runs the risk of confiscation, due to bank bankruptcy (bail-ins), or the risk of government confiscation.

If you hold gold in a bank, and the bank goes bankrupt as it was the case in Argentina, then you lose the advantage of immediate access to a means of payment for your basic needs in times of trouble, when access to traditional means of payment like cash or bank cards is hampered. The risk of bank failure is real and it was repeated a few years later in Cyprus.

There is also the risk of government confiscation and it actually took place in the US in 1933 with President’s Roosevelt’s executive order 6102. The risk of government confiscation is small but is still there. Confiscation could happen if there is panic in the banking system or just before a new monetary system is announced.

Storing Gold at Home

Storing gold at home, is the least expensive for storing precious metals, as customers benefit from the absence of storage fees. This form of storage is ideal for customers with small to medium size collections of precious metals. All you have to do is find a secure spot in your house or property and store your valuables.

Before you do anything you must know that keeping gold at home has also a few drawbacks. Investing in precious metals is a completely private decision, the less people who know about it the less of a potential target you will be. So don’t tell anyone you keep gold at home, and at the same time make sure it is well hidden.

If thieves find it or if you lose it, its gone and its gone for good. You see gold bullion coins are easy to sell, as they are bought and sold by individuals, coin dealers, banks and commercial dealers without a question.

Attention, with storing gold bars at home, as in order for the dealer to accept them, you might need to get your gold bars refined, so the dealer can verify the gold content, which costs money and takes time.

Is buying a safe a solution? No I do not think so. An upright safe is always visible and it does send the wrong message. A hidden safe is also not a good idea either, you see a burglar can find it and if he cannot open it he will come back with his friends. In addition, a punk with a pistol can easily convince you to open the safe.

A sunken floor safe could be a better idea, a safe you can install in the floor of your closet or garage. These safes are generally small but invincible, as the door to them is actually below the level of your floor, often hidden under the carpet.

In my opinion, the best place to hide valuables is up in the attic. A few pounds of gold can easily be stashed in the far corner of your attic and there is no chance that any intruder, is going to go up there and search.

Private Storage Firm

On larger quantities of gold I recommend the use of a private storage firm (precious metal depository). Precious metal depositories offer a top-level security, as they are highly guarded establishments that are under constant surveillance, with all activities inside the depositories monitored and recorded.

Some precious metal depositories offer two forms of storage, segregated and communal. Segregated storage, allows customers to keep their valuables in an individual storage compartment, preserved for private use. In comparison, communal storage, allows customers to keep their valuables in shared storage area along with other people’s bullion. Both types of storage offer excellent security. Unfortunately not all depositories offer both forms of storage, so it is important to verify the information in advance before committing to a particular depository.

Furthermore, many depositories offer further means of protection through their accounting-auditing and insurance policies. If after an inventory inspection, an amount of gold is missing, customers should remain confident it will be covered by the insurance policies.

Storing gold should not be an headache, after all the purpose of buying gold is to ensure peace of mind and financial stability. Choose the type of storage you feel most comfortable with and that should be enough.

Conclusion

I hope in this post I provided enough information for the investor who is actually considering investing in precious metals. I wanted not to keep it short and provide only the necessary information. If you have any questions please leave a message, I will be more than happy to answer back.

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