How to Invest in Gold: What you must know! The Investment journey is often described as a rollercoaster ride and confusion/uncertainty will always be a part of the experience. For a variety of different reasons, People seek out “safe” investments whenever the stock market is in a downward trend, which enhances the demand for gold during these times.
In particular and as predicted by the World Gold Council, gold’s price soared in the first quarter of 2020 to levels not seen in the preceding ten years.
In comparison to other types of investments, gold is a unique beast. When there is a lot of anxiety about the future, gold tends to rise in value while stocks fall.
Gold is something you can hold in your hands and call your own but on the negative side, it doesn’t produce anything of worth on its own. These factors make it a more risky investment, and it demands a more careful thought process and approach when considering it as an investment.
Since ancient civilisations first employed gold as a money, the precious metal has played a vital part in the orderly operation of business and markets all over the world. Gold has traditionally been considered a “safe haven” due to the demand for the precious metal, with its rarity and distinctive features playing a key role in its underlying worth.
Why Put Your Money Into Gold?
In the event of an economic collapse or turmoil, gold is always a very popular investment alternative. It is referred to as a “safe-haven investment” because, when stock markets around the world plummet, the gold market almost always continues to sail steadily forwards, and in some cases, increases in value quite considerably. On the flip side, Gold does not appreciate considerably in value when global stocks are doing well and advancing.
This is most likely due to the fact that gold is different from more traditional investments in terms of its intrinsic value. Gold, as a contrast to say shares in a listed company, does not generate any value. Other than the fact that it’s a pretty object that people admire, it doesn’t employ anyone, pay taxes or make any other contributions.
In other words, its value is determined by what we give it, therefore when we are fearful of negative economic circumstances, we place a higher value on it then we would otherwise place. After all, in a post-apocalyptic environment, someone may well be able to sell gold for essentials to live, whereas a company share would indeed be worthless.
Gold tends to do well when there is a lot of uncertainty about the future, for example, when stocks do poorly and the dollar declines in value or a prime example as the world struggles to control the Covid19 pandemic.
This being said, it doesn’t mean we should all be putting our money in gold. The question on every investor mind is “Is Gold a better or worst investment choice?” At best only time will tell. It is well documented that If you invest in gold rather than equities, your money will most likely grow at a slower rate and should be taken into consideration when planning for the future.
If you own physical gold, you’ll need a safe place to keep it and insurance to protect it and if you don’t want to deal with actual gold bullion itself, you’ll have to weigh the advantages and disadvantages of other gold investment alternatives, such as gold exchange-traded funds (ETFs) and gold cryptocurrencies.
| Pros | Cons |
| Holds value (or grows) during a recession | Doesn’t grow much wealth in a robust economy |
| Gives you real, tangible wealth | Requires storage and safety solutions |
| Might be able to barter gold for goods and services in difficult times | Can be lost or stolen and Doesn’t produce anything of value on its own |
| Gold alternatives allow you to invest in gold without actually storing it | Gold alternatives can be confusing and complicated |
Investing in Gold what You Need to Know: If you want to invest in gold, there are a number of options available. Some are better than others depending on what you’re trying to accomplish. Here is a list below:
Gold and Individual Retirement Accounts (Superannuation Accounts)
In your retirement planning, you may want to consider investing in gold as a means of protecting your money. The best part is that you’re not the only individual to come up with this idea and you do not need to re-invent the wheel. Lucky for you, there are many different ways to implement this into your investment strategy.
Unfortunately the harsh reality is it is not as straightforward as simply depositing money into your brokerage account. Should you want to go down this path, here are only a few companies where you can do it effectively.
When it comes to IRA gold investments, Orion Metal Exchange is one of the best options. Even funds from an existing IRA can be rolled over into a Gold IRA, if the funds are available.
If you’d want to set up a gold IRA investment, Patriot Bullion is another option.
Because you will be receiving actual gold as a result of this method, you will need to deposit it in a separate third-party facility to protect it from theft or destruction. Orion Metal Exchange will help you open a gold IRA and suggest safe places to keep your gold.
Futures and Options on Gold
In general, futures trading isn’t a good approach for inexperienced investors, and gold is no exception. In order to make money in gold futures contracts, you must have a solid understanding of how the gold market operates.
Buying futures essentially means buying a particular amount of gold at a certain price at a certain period in the future. This can be a very risky exercise if you do not know what you are doing. Nevertheless, experienced traders prior to actually purchasing the gold, opt to sell their contracts instead.
You can make a lot of money if you understand the process thoroughly although this is not an easy task. You may also be able to increase your returns significantly by leveraging your existing capital. This option elevates your risk profile extensively though. Always seek investment advice from a professional if you are unsure how leveraging works.
Because this is such an advanced and very risky approach, there aren’t many markets where you can buy and sell contracts in gold futures because the market is so small.
Gold in its physical form
If you want to invest in gold, the most obvious and perhaps most popular option is to simply buy it. It’s important, though, to buy gold in the right form.
Purchasing jewellery may seem like a wise investment to some, but this isn’t always the best investment decision. When you buy liquefied gold, the price is lower because the cost of the jewellery itself is higher because of the extra labour and resources required to make it.
Gold-plated or alloyed coins that are popular with collectors are also in most cases bad investments for the untrained eye. There is often much less real gold in the item then the weight suggests.
In most cases, many investors prefer to just acquire gold bullion, a specific amount of pure gold with its weight clearly marked.
Gold bars and coins are two common forms of bullion. Precious metal coins are more convenient since they may be kept in a single container, separated into smaller packages, and sold more easily. What makes this option more attractive is they’re less expensive to acquire over time when using a dollar-cost averaging strategy.
When investing in gold, there are a few factors to keep in mind:
- Know what you’re buying — is it pure gold? What’s its weight? What’s its value?
- Insure your gold in case of fire, theft, or some other disaster
- Buy gold from a reputable dealers
- Use safe storage, either in a safe deposit box at the bank, or an off-site vault
Buying Shares in a Gold Mining Company
Mining gold is the only means to increase the amount of gold being produced at any given time, aside from melting down gold from various different sources. By investing in gold mining stocks, you may avoid the hassles of physically holding and safeguarding your own gold reserves.
As a standalone asset class, gold mining equities pose a significant risk. For example, the environmental impact of mining in general is negative, which is why many gold mines are located in nations with loose environmental standards, such as South Africa.
In the majority of cases, these are developing countries in which wars and civil instability are common. This can pose a significant risk to your stock strategy; for example, if you are unlucky and the company in which you invested your money in suffers a huge mining incident and with poor PR, the value of your shares could plummet.
In Australia, in particular Western Australia where Gold Miners are abundant, there are strict environmental laws that these gold mining companies have to abide by. This is good for the environment and for your investment.
ETF’s (Exchange Traded Funds) That Invest In Gold
Investment in gold ETFs can be an excellent alternative if you want to invest in gold but don’t want to deal with specific companies. As with ordinary ETFs, investing in gold ETFs is more like buying a basket of different gold mining stocks in one investment rather than buying individual mining firms.
This investment strategy also spreads your risk among a number of gold mining companies, preventing you from placing all of your money on a single stock. SPDR Gold Shares (GLD) is one of the most widely held gold exchange-traded funds (ETFs) on the market today and could be an option for you.
Investing in Gold using Cryptocurrencies
Investing in the PAX Gold (PAXG) cryptocurrency allows you to combine traditional and cutting-edge investment methods all at once. PAXG has a significant benefit over other gold exchanges in that you may get started for as little as one hundredth of a troy ounce, or around $20, rather than the more expensive starting price of approximately $2000. Latest Gold Price from Kitco
It’s important to note that Purchasing PAXG does not provide you with your own pieces of gold, but it does link you to “assigned” gold, which you can use to fund your account. This implies that each PAXG token is linked to an actual piece of gold with your name on it, which is kept in a secure storage vault for safekeeping. This is comparable to the way the U.S. dollar was initially supported by bullion before it became fiat money (i.e., not linked to actual gold in a vault).
In general, one of the downsides of investing in gold is that, unlike a bank account, you will not be able to receive interest on your money and watch your money grow.
In conclusion
Gold is a specialist investment that is frequently overhyped in the financial media today. In spite of this, it may nevertheless have an important role to play in your portfolio. We recommend that you consult with a financial expert to determine whether or not investing in gold is good for you and, if so, which option is best for you.
Even if you’re a seasoned trader who is confident in your ability to navigate the complexities of gold futures contracts, it’s a good idea to sit down and talk with an objective third party. This is an excellent technique to make sure you don’t get carried away with your investment and financial ideas.
Hope you found this article on “How to Invest in Gold” helpful.
