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Many investors have considered at some point whether or not they should devote at least some of their capital to investing in gold. The allure of holding gold bullion bars or coins in your hand is tantalizing to say the least. The issue for most is that they do not know or understand how to invest in gold.
Do you simply go to your local coin dealer and buy coins, should you go to a bank? What exactly is a gold fund and is gold actually a safe and profitable investment? There are many different ways to invest in gold. Buying physical gold is one such way and is perhaps what most people envision when considering an investment in gold.
Gold can come in many forms including gold bullion bars of varying sizes, coins and jewellery. Additionally, tangible gold can be bought and sold without ever actually holding, touching or even seeing the object. The most common way this is done is through exchange traded funds or ETFs that use gold bullion as their basis. The final form of investing in gold that we will discuss is through stocks and funds that are not physical gold, but related to gold through mining or processing.
For many of us, it may be difficult to imagine owning and holding a bar made of gold. The first thought that comes to mind might be a gold bar the size of a brick or even larger. However, the reality is that there are many different sizes of gold bars available to investors of all financial means.
Bullion bars come in sizes ranging from 1 gram up to 1 kilo or more. To be of investment quality, a gold bullion bar should be When purchasing gold bars for investment purposes, you should of course try to get the best price possible.
Smaller bars will carry a higher premium, which is something to keep in mind when shopping for gold bars. However, they are more convenient to store and allow for multiple small purchases instead of one large purchase. Gold coins are another very popular choice for gold investors.
It is important to understand the distinction between gold coins for investment and gold coins for collection, however.
Investment coins are generally minted specifically for gold investment and contain Collectable coins are usually less than However, there are many others available and as long as they fit the criteria for investment coins, any of them would make a good choice.
Often the deciding factor should be the mark-up. Physical gold is bought and sold based on the current spot price. That is the market price as of the time of the quote, which changes frequently. The mark-up is then added to the spot price to give the retail price of the product. The greater the mark-up, the more the price of gold would have to increase in order for your investment to be profitable.
Just as we mentioned with gold bars, the smaller the weight of a coin, the more the mark-up will likely be. We will take a look at the prices of several bars of gold. Coins will follow the same general rules and could easily be interchanged in our example. To do this, we take the quoted price minus the spot price and divide that answer by the spot price.
When the result is multiplied by , we get the percentage mark-up. This means that in order to break even on our gold investment, the spot price of gold would have to rise However, this is not always possible; therefore it is best to understand the options. Some larger banks do carry gold bars or more likely, gold coins, in their branch offices. The same guide for pricing applies here so be sure to shop around.
A better option for most people is to buy gold coins or gold bars online from reputable dealers. Again, consider all of your options and check reputations. Do not fall for investments that seem too good to be true and protect yourself from gold scams, just as you would any other investment.
For those who would rather not deal with handling and storing physical gold bars or coins, there are other options for investing in gold. A number of exchange traded funds or ETFs have been created in which the goal is to track and follow the price of gold.
It has an allocation of gold stored in London and each share is worth one tenth of an ounce of gold. The price of the ETF moves up and down with the spot price of gold and shares can be traded over an exchange just like any other ETF or stock.
Finally, it is possible to take advantage of gold prices without investing directly in gold. Mutual funds offer the option of investing in companies that engage in mining, distributing or processing gold and other precious metals. You may also purchase stock in individual companies separately; however, this practice does hold more risk and funds are usually the best choice for the average investor. Although the funds do not invest directly in physical gold, they are affected by the price fluctuations.
As demand and price for gold go up, so do the profits and in turn the stock prices of the companies involved. If they should fall, the corporations involved in mining, processing and distributing gold would be negatively affected, thus lowering the funds prices. Many investors see investing in gold as a great hedge against inflation and other economic pressures affecting the world today. It can also be a great source of capital appreciation.
However, investing in gold or any precious metal or other commodity carries some inherent risk and should be done cautiously and only as part of a well-diversified investment portfolio. However, this information should be taken with a grain of salt. There is no guarantee that the price will continue to rise or even be maintained. Many well-informed analysts believe that there is still room for the price of gold to rise.
Demand is growing at a fast rate since careful investors are looking to gold and silver as safe investments in uncertain economic times. Also, the value of gold has increased as its use in high-tech devices and electronics has quickly grown. It is true that there is no guarantee that the gold market will stay hot and gold prices will continue to rise. However, savvy investors know that gold is most properly used as part of a well-planned, well-diversified portfolio, and for long-term capital appreciation and wealth-building.
Intro to Investing Chapter Buy Shares Online Chapter First Stock Purchase Chapter Lowering Risk Chapter Dividend Stocks Chapter Account Types Chapter What Are Stocks Chapter Purchasing Bonds Chapter Mutual Funds Chapter ETF Investments Chapter Terms and Ratios Chapter Researching Stocks Chapter Reading Tickers Chapter Day Trading Chapter Options Trading Chapter Forex Trading Chapter Commodities Trading Chapter Gold Markets Chapter Guide to Gold as an Investment Many investors have considered at some point whether or not they should devote at least some of their capital to investing in gold.
Ways to Invest in Gold There are many different ways to invest in gold. Investing in Gold Bars and Gold Coins For many of us, it may be difficult to imagine owning and holding a bar made of gold. Physical Gold Pricing Physical gold is bought and sold based on the current spot price. Investing in Gold ETFs and Funds For those who would rather not deal with handling and storing physical gold bars or coins, there are other options for investing in gold.
Gold as an Investment Many investors see investing in gold as a great hedge against inflation and other economic pressures affecting the world today.