How To Invest In Gold

gold coins

Investing in gold could be an headache for the young investor and the big question is “how to invest in gold?”  There are several ways available to the investor however, in my mind some of them posses certain advantages over the others.

Reasons to invest in gold

1-Gold has a history of holding its value unlike paper currency, coins, or other assets, gold has maintained its value throughout the ages.  People like to invest in gold because, they see gold as a way to preserve their wealth from generation to generation.

2-Limited supply due to increased wealth in emerging markets, which has resulted to increased demand, this may result in supply constraints boosting the price of gold.

3-Gold is a hedge against geopolitical uncertainty and that is why it is called “crisis commodity,” because people flee to its safety,” when world tensions rise it outperforms other investments.  It also does well when confidence in governments is low.

4-Portfolio diversification.  Gold has always played an insurance role in portfolios for various reasons. (global disaster, inflation,war etc.)

5-Gold is money.  No matter where you go, if you have gold is like having money, you can exchange it right away,in some countries it’s easier to exchange gold, rather than local or certain currencies.

6-Gold unlike fiat currencies is not a claim or someone else’s liability.  Gold has never lost it’s value for exposure to mismanagement, corruption, theft, war etc.  There has never been (and never will be) a haircut to gold, as its been happening with with debts and savings.

7-The war on cash.  Interest rates are negative in many places in the world including Europe and Japan and central bankers like Mario Draghi, are been called to eliminate high denomination bills.

8-Loss of confidence in central bankers.  Unfortunately the central bankers did not reform their banks and their operations.  The Europeans and Japanese are trying to stimulate growth by negative interest rates and in the US, the Federal Reserve backed away from the December 2015 policy to increased interest rates in 2016.

9-The weak dollar.  Gold moves in the opposite direction of the American dollar and the dollar is still weak, even though as we speak it is surging forward.

gold bars

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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.

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Should I invest in gold or silver?

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?

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 different 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.

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.

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Selecting the appropriate broker

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.

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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.

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.

 Vault location

Location of vaults is very important.  A vault should be located at a free trade zone to avoid taxes or duties.  There are many trade free zones in the world, and most vaults are located there.  (Singapore, Toronto, Switzerland, New York etc.)

Investing is a good way to protect your savings and may reward you with substantial gains. If in the meantime you wish to start your own online business from home then, you are welcome to visit my website “No Secrets Affiliate Income.” There you will find exactly what you need to know, in order to start your own online home business from scratch.

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