Gold is a precious metal that is actually quite simple to buy and sell. The fact is, gold trading is a booming business. Many people want to buy gold or sell gold. There are many different reasons why gold is so popular. In this article, we will be looking at reasons why you should buy gold and how you can buy gold. We will look at ways to buy gold online as well as rules on what to look for when investing in gold bars, coins, or other physical bullion.
Things to know about buying gold
Gold investing can be a great way to protect your wealth from the effects of inflation and political turmoil in today’s world. It’s also a solid hedge against market downturns, which is why many financial experts recommend that people include some gold in their portfolios.
In order to get started, however, it’s important that you know what you’re doing. Here are six things you should know about buying physical gold:
Know Your Options:
Not all gold investments are created equal. It’s important that you know what kind of assets you’re buying and how they will affect your portfolio. For example, while gold stocks are popular among investors because they provide exposure to the price movement of physical gold, they come with additional risks. If the company that issues the stock goes under or gets into financial trouble, your investment could be affected — and so could your portfolio as a whole.
Don’t Get Seduced by Shiny Gold Objects:
Gold is beautiful, shiny, and very expensive for what it is. Gold jewelry has no place in your investment portfolio because it doesn’t act like an investment. When shopping for physical gold as an investment product, remember that price matters; gold rings and necklaces typically don’t bring the same price per ounce as those bars.
Purity:
Before making a purchase, always check the purity of a gold coin. The soft nature of gold makes it vulnerable to being fused with other metals, including silver and copper, to make it harder and more durable. Be sure that the purity of the coin you’re buying doesn’t have any metal additives that would lower its value.
Weight:
It is also essential to check the proper weight of your gold coin before buying. Gold bullion coins come in different sizes, so be sure to ask for the proper weight before handing over your money. A heavier coin does not necessarily mean a better value, however, since a thin layer of gold can be used to cover a lighter base metal underneath it.
Hallmarking:
Be sure you purchase items from an accredited dealer whose products are graded honestly and accurately according to industry standards and state laws.
Use your savings instead of credit:
Buying gold isn’t as simple as going to a store and purchasing it with a credit card. Instead, you’ll need to exchange your currency for the gold, then pay for it at the counter in cash. That means you’ll need to have the money in your account before you go shopping.
Treat gold like you would any other large-ticket purchase: Only buy what you can afford, and don’t finance gold purchases with credit cards. Avoid paying interest charges by making sure that you can afford the entire purchase without putting any debt on your credit card.
What makes gold so attractive to investors?
According to Juan Carlos Artigas, director of investment research at the World Gold Council, gold has a proven track record of strong returns, liquidity, and low correlation, making it an extremely effective diversifier.
Investors should pay particular attention to the following characteristics:
- The returns from gold have outperformed those of stocks and bonds during specific stretches, although it does not always beat them.
- You can readily convert gold-based assets into cash if you buy certain types of gold-based assets.
- Gold exhibits low correlations with stocks and bonds, meaning when stocks and bonds go up, gold may decline or vice versa.
- Gold can be highly correlated to other assets, but its low correlation can help diversify portfolios, which means the portfolio is less volatile as a whole.
- Gold is a defensive investment as investors often turn to gold when they perceive threats to the economy.
How to Buy Gold Safely and Effectively?
A little bit of gold in your investment portfolio could be accomplished by investing in gold-related stocks, mutual funds, and ETFs.
Gold Mine Stocks
It is instead possible to invest in gold mining and refinery companies rather than physical gold. There are several companies that produce gold including Barrick Gold (GOLD) and Newmont Mining Corporation (NMC).
It is likely that their stocks prices will be correlated, even if their prices do not exactly match the trend of physical gold’s price. You can invest in gold without handling physical gold or being exposed to the risks and headaches that go along with that.
Mutual funds and exchange-traded funds investing in gold
It is not necessary for you to invest in a single gold company, rather you can invest in gold funds or exchange-traded funds that are related to gold. A gold fund is one of the most popular investments for tracking the gold price as well as exposure to gold futures and options. Gold funds can either invest directly in gold mines and refineries, or they can invest in gold futures and options.
Gold as an investment: is it worth it?
A modern-day literal gold rush may not the place for you if you’re hoping to strike it rich during an era of gold rushes. Gold increased by approximately 36% over the past five years, compared to a 104 percent gain in the S&P 500 index. While both gold and the overall stock market performed well, during a bull market, gold ended up underperforming.
Many people consider gold to be a safe haven from inflation and the extreme peaks and valleys of the stock market. During the bear market that swept across the stock market in the period 2007-2008, the overall stock market plunged 33% as an example while gold only fell 2% during this time period.
Although gold can be a safe investment as long as it is not too volatile, gold is not a 100% safe investment. A portfolio that is diversified without totally relying on gold can be built with an appropriate asset mix. If you want to maintain some of that golden gleam within your portfolio, then the key is to keep it at a small percentage of your investment budget.