All precious metal investors wonder how to invest in gold since there are so many different ways to do that. In this article, I explain all the different ways an investor can invest in gold and how this can be done.
- 1 Reasons to invest in gold
- 1.1 1-Gold has a history of holding its value
- 1.2 2-Limited supply
- 1.3 3-Gold is a hedge against geopolitical uncertainty
- 1.4 4-Portfolio diversification
- 1.5 5-Gold is money
- 1.6 6-Gold unlike fiat currencies is not a claim or someone else’s liability
- 1.7 7-The war on cash
- 1.8 8-Loss of confidence in central bankers.
- 1.9 9-The weak dollar
- 1.10 10-Financial crisis is on the way
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- 2 When is the best time to invest in gold?
- 3 How to invest in gold
- 4 Should I invest in gold or silver?
- 5 Investing in gold bullion bars?
- 6 Investing in gold bullion coins?
- 7 Other ways to invest in gold
- 8 Choosing the right gold broker
- 9 Selecting the appropriate broker
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.
Due to increased wealth in emerging markets, which has resulted in increased demand, this may result in supply constraints boosting the price of gold.
3-Gold is a hedge against geopolitical uncertainty
That is why it is called a “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.
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 its value for exposure to mismanagement, corruption, theft, war, etc. There has never been (and never will be) a haircut to gold, as it’s been happening with debts and savings.
7-The war on cash
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.
10-Financial crisis is on the way
Central banks and governments all over the world decided that the only way to deal with the covid19 caused crisis is by printing money. By doing that they inflated further the overvalued stock markets and market correction is on the way. In addition, many market analysts expect global another global crisis.
When is the best time to invest in gold?
Although there have 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 a 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. Over the centuries there have been many changes, and nowadays, the investor faces a challenging task, due to the fact that there are many options available. In this article, I intend to inform the investor on the ways he, she, can actually invest in safe-haven gold.
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 a currency no matter where you are, and the owner could have a great advantage during hard times. The only disadvantage to owning gold is that it tends to tray with a wide spread between the 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?
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 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, bar 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 the underlying demand for bullion coins, their small size, and the costs of manufacture. In addition, the amount of bullion varies depending on the coin’s type, weight, and precious metal.
Other ways to invest in gold
Gold options and futures
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
This is a way of investing in 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 the 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 essential 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.
Selecting the appropriate broker
Check out the comments regarding the firm especially the complaints, see how these complaints were handled. If there is a long list of complaints, then this is a sign to worry about. 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 salesperson gives you a short shift or hits you with a high sales pitch, then this is bad news.
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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 the client’s name with no intermediates. This way there is no risk of the investor losing 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 pick up 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 client’s questions and queries, and give answers and solutions promptly.
The location of the vaults is very important. A vault should be located in 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 in gold is a good way to protect your savings and may reward you with substantial gains. Make sure when investing in precious metals always be patient and go for the long term. This way you can’t go wrong.