Since its discovery, gold has been a symbol of wealth and status. In the olden days, the affluence of rulers and kings was measured by how large their reserves of this precious metal were. Today, thousands of years later, this precious metal is still as valuable.
These days, unlike in the past, regular people have easy access to this symbol of wealth, so to speak. It can be collected in various shapes and weights, depending on the choice of the buyer. For many, investing in this metal is considered an insurance policy against inflation and a rewarding way of diversifying one’s investment portfolio.
One might be asking what exactly makes this metal so valuable and the simple answer to that question is its rarity. The supply of this natural resource is limited and cannot be increased artificially. Bear in mind also that we humans only value things that are scarce. The combination of all these factors makes gold very appealing and desirable.
What You Should Know Before Going into Gold Investment
- Stocks, ETFs, and mutual funds that pay dividends are the only gold investments that provide an income stream.
- Minted coins are usually 90 percent to 99 percent gold
- Gold stocks do not translate into its physical form
- Storing physical gold can be costly
- Because this metal is mostly used in making jewelry, demand is never a function of its true need
- In the U.S., jewelry made from this material has a composition of 58.3 percent (14-karat). Internationally they could have up to 75 percent (18-karat)
- Although its supply is currently limited, an increase in its price may lead to more mining thereby increasing the supply.
Popular Gold Investments
These are very easy to buy and are recognized legal tenders. Also, because they are minted by the government, you can be sure of their purity. Unfortunately, today newly-minted coins have a lesser market value than numismatic coins, also called collectibles.
Collectibles are older coins and the preferred choice for many American investors making them a reliable gold investment option. Their preference to these coins is influenced by the executive order President Roosevelt gave during the Great Depression when this precious object was being hoarded. Exempting collectibles, he called in all the gold held by Americans. This single act made numismatic coins very valuable and popular among investors.
Today popular gold coin choices include the U.S. Mint 24K Gold Buffalo, South African Krugerrand, American Eagle, British Sovereign, Canadian Maple Leaf, and Vienna Philharmonic. Coins are the preferred method of owning physical gold because they can be easily transported, sold, and stored unlike bullions.
2. Gold Stocks, Mutual Funds, and Exchange Traded Funds (ETFs)
For investors who fancy a little bit of cash flow as they invest in this desirable metal, the above-mentioned investments are a win. With these stocks and ETFs, an investor profits without the cost and headaches involved in physically storing the metal.
Mutual funds that invest in multiple companies that mine gold are great for diversifying investment portfolios and spreading risks. The only risk involved in these investment types is that they are not traded with the same price as bullions. Click here to see the most popular gold ETFs
This means that the success of this investment is entirely dependent on the choices made by the mining companies. If these companies run a loss, investors suffer the same fate, irrespective of the current market price of bullions.
Bullions are bulk metals, in this case bulk gold. They usually have a high level of purity going up to as high as 99 percent. Bullions can take any practical shape and size that is commercially tradable. However, they are mostly made as bars.
This type of investment is very expensive due to a number of factors. The price of bullions is influenced by the cost of gold itself, the cost of the purification and refining process, the dealer’s charges, and the cost of shipping. This is why bullions are mostly invested in by extremely wealthy individuals who can afford the cost of acquiring it.
Smaller investors can also invest in bullions of smaller sizes that are easy to transport and store. Storage of bullions requires a lot of money because the facilities where they are stored are heavily guarded and often have the latest security systems and technology for maximum safety. Visit https://en.wikipedia.org/wiki/Bullion to learn more about bullions.
Bullions are difficult to sell or use for barter unlike coins. This is one factor that discourages a lot of people from investing in them.
When combined with other precious stones and metals, the value of gold jewelry can be significantly enhanced. This type of investment allows the investor the pleasure of showcasing the shiny metal. They are often passed down to the younger generations in the family adding sentimental value to them.
When it comes to strict investment, jewelry is the least preferred option among investors. This is because the price of acquiring them far exceeds their meltdown value. Their prices are influenced by other precious gems and metals used in their making as well as the value of the company that made them.
Often, jewelry buyers are misled into paying more for gold jewelry with lesser Karats than intended. This is why the jewelry investment is often considered riskier than others.
Gold is readily available today. It can be purchased online, from private dealers, private mints, jewelry shops, government mints, and vending machines. In purchasing it, it is advisable to go with someone who has a deep understanding of the metal to avoid being ripped off.
For investors who enjoy the thrill of the stock market, caution should be taken when picking out stocks and ETFs traded on this asset. While a lot of profit can be made trading this metal daily, weekly, or monthly depending on the type of trader one is, it is still best to treat it as a long-term investment in order to get maximum returns with lesser risk.
The value of this precious metal has stood the test of time and will continue to. In the event that our current monetary system fails, it will be the means of exchange we fall back to. It is therefore wise for anyone capable to begin investing in any of the types of gold investment discussed in this article, especially coins.