Hoarding gold was the most favored investment by the rich throughout history, and gold remains the most popular investment among all precious metals. Gold is of equal value, easy to carry, and accepted everywhere in the world. This article describes four ways to invest in gold. The best options vary for each person and depend on the amount of money you can invest, your investment goals, the risk you can take, and how long you intend to hold your gold.
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Method 1 of 5: Buying Used Gold
Step 1. Manage your risk
Collecting and storing used gold has become a fairly popular investment strategy. With gold prices rising steadily, buying used gold is a low-risk way of investing in gold.
- Investment Duration: Varies
- Investment Nature: Low risk – Gold is the safest investment option and the potential returns far outweigh the small risks.
- Investor Profile: Perfect for a novice gold investor, or for someone just getting started looking to prepare for tough times.
Step 2. Start with the family
Ask family members and friends who want to throw away their gold. Almost everyone has a broken necklace or ring, mismatched earrings, and other forms of used gold that they want to sell. Negotiate a price they are happy with, but don't forget to think about the benefits for you.
Step 3. Place an ad in the newspaper
Place an ad in the special section as well as in the offer section of your local newspaper. Most people who see the ads in the offer of help section are experiencing financial difficulties, so placing an ad offering to buy their goods can have good results.
Step 4. Place an ad on Craigslist
It's similar to a newspaper ad, but it's free and has the potential to reach more people.
Step 5. Monitor internet auctions
Gold items usually sell for less than the value of the used item itself, making them a good investment tool. Be sure to factor in taxes or shipping prices before bidding.
Step 6. Build relationships with local thrift store owners
Provide your contact information so they can contact you when someone sells gold to the thrift store. Some small shops can't do refining or don't want to buy and sell used gold.
Method 2 of 5: Buying Solid Gold
Step 1. Buy solid gold
Countries around the world continue to spend money they don't have, causing economic instability. Solid gold is the only protection against this instability.
- Investment Period: Long term – Even if the economy improves, inflation will also rise. What assets can defend against inflation? Gold.
- Investment Nature: Low risk: Experts agree that the investment pyramid is built on top of gold bars.
- Investor Profile: Suitable for new investors.
Step 2. Decide what type of solid gold investment class you want to buy
You can choose between gold coins, gold bars and gold jewelry.
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Gold coins: Historic coins (pre-1933 usually have the highest value, because they have historical value other than the value of gold itself.
- Examples of historic gold coins that do not sell at exorbitant values beyond the price of gold because they contain only 90 percent gold are the British Sovereign, British Guinea, Spanish Escudo, 20 and 40 French francs, 20 Swiss francs, and Eagles (10 dollars), Half- Eagles (5 dollars), and American Double Eagles (20 dollars).
- The British Sovereign and the American Eagle Gold Coin are exceptions with a gold content of 91.66 percent, or 22 Karat. Other gold coins include the Canadian Maple Leaf, Australian Kangaroo, South African Krugerrand (which started the entire gold coin investment industry) and the 24 Karat Austrian Philharmonic.
- Gold bar: Gold is also sold in the form of bars which usually have a gold content of 99.5 to 99.9 percent. Notable gold refiners include PAMP, Credit Suisse, Johnson Matthey, and Metalor. You will see the names of these gold refiners on the gold bars you buy.
- Gold jewelry: One of the disadvantages of buying gold jewelry as an investment is that you also have to pay for the workmanship and popularity of the gold jewelry design. Any jewelry that is under 14 carats or less is not suitable for investment and the resale price will be covered by the refining price you will have to do. On the other hand, you can get antique or old gold for very low prices at home sales or similar auctions if the value is not recognized by the people there, or no one is bidding high enough. Old jewelry has a higher value because of the unique processing process, so it can be a lucrative and fun way to collect gold.
Step 3. Choose the weight of gold you want
Of course, the heavier the gold, the higher the price. What you should never forget is your ability to store them safely.
- The American Eagle Gold Coin and the other coins listed above are made in four weights: 1 oz., 0.5 oz., 0.25 oz., and 0.10 oz.
- Gold bars are typically sold by the ounce and consist of 1 oz, 10 oz, and 100 oz bars.
Step 4. Find a source that sells solid gold
Often, gold sellers, brokers, and banks sell gold coins and bars. When assessing gold traders, pay attention to how long they have been operating, whether they have certifications, and their investment specialties.
- Jewelers sell gold jewelry, but if you choose to buy this type of gold, make sure you choose a store that is well-known and has been in operation for a long time.
- Auctions can be another source of gold jewelry, but be aware that auctioned items are usually sold as is and you will have to weigh the value yourself.
Step 5. Find out the current market price for gold
Once you've found the price, verify the price with at least one other reliable source, and it's even better if you verify it with several other sources.
Step 6. Try to buy coins or gold bars at or below the dominant market price plus a service fee of approximately one percent
Most gold sellers have minimum purchases, shipping and handling prices, and offer bulk discounts.
Step 7. Ask for receipts for all purchases and confirm delivery date before you pay for solid gold
- If you buy jewelry, keep all receipts in a safe place. If you buy it at auction, remember to add any applicable service fees and sales taxes.
- Store your solid gold in a safe place, in a vault if possible. This is a very important aspect of solid gold investing because the security of your investment strategy is limited by the security of your deposit strategy. Invest in a high-level security mechanism or ask a company to stock it for you.
Method 3 of 5: Buying a Gold Futures Contract
Step 1. Think ahead
People who are willing to take risks will prefer to invest in gold futures contracts. However, it should be noted that this method is more like speculating than investing, which is almost the same as gambling.
Step 2. Investment Term:
Varies – in general, investing in gold futures contracts is equivalent to making short-term predictions of the future price of gold. However, many skilled investors invest and reinvest their gold futures contracts over the years.
- Investment Nature: High risk – Gold futures contracts are highly volatile and inexperienced investors can lose a lot of money.
- Investor Profile: Suitable for experienced investors; Very few novice investors can earn money with gold futures contracts.
Step 3. Open a futures account at a commodity trading firm
With a futures contract, you can set a higher value for gold than the cash you have on hand.
Step 4. Invest capital that you can afford to lose
If the price of gold drops, you may end up paying more than you invested once the commission is calculated.
Step 5. Purchase a gold futures contract
A gold futures contract is a legally binding agreement for future delivery of gold at a pre-agreed price. For example, you can buy 100 oz gold. worth $46,600 on a two-year contract at three percent of its value, or $1,350.
Step 6. Commodity trading firms charge a commission for each transaction
- Each trading unit on COMEX (Commodity Exchange) is equivalent to 100 troy ounces.
- Electronic trading on the Chicago Board of Trade (e-CBOT) is another way to trade gold.
Step 7. Wait for your contract to expire
Only then can you take your profits or pay for your losses. An investor can exchange their futures contract for physical gold, which is referred to as EFP (Exchange for Physical). However, most investors balance/liquid their trading positions before the contract expires instead of receiving or delivering physical gold.
Step 8. When you buy a futures contract for a portion of the value of the related property, you are essentially risking the change in the price of the property
You can make a lot of money buying gold futures contracts if they go up in value against your currency, but if they go down you can lose your entire investment and possibly more (if your futures contracts aren't sold to someone else when you don't have the money you need). enough). This is a way to hedge against risk or speculate, but not a way to increase savings.
Method 4 of 5: Buying Gold Mutual Funds
Step 1. Using gold mutual funds
Gold mutual funds are designed to monitor the price of silver and gold and are usually purchased through stockbrokers. It's like a derivative contract that tracks prices, but the difference is that you don't own the associated gold asset if you invest here.
Step 2. The two types of gold mutual funds are Market Vectors Gold Miners and Market Vectors Junior Gold Miners
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- The Market Vectors Gold Miners mutual fund seeks to replicate (before costs and expenses) the performance and price of the New York Stock Exchange Arca Gold Miners Index. Its portfolio contains gold mining companies of various sizes around the world.
- Market Vectors Junior Gold Miners mutual fund. Opened in 2009, this mutual fund is quite popular among investors seeking indirect access to gold assets. Although similar to Gold Miners, Junior Gold Miners focuses on small companies that are involved in the search for new sources of gold. Since the company is not yet well established, the risk is greater.
- Investment Time: Short term – there is a fee charged annually which is taken from the amount of gold you invest, making this method less attractive.
- Investment Nature: Moderate risk – because gold mutual fund investments are usually for a short period of time, risk can be minimized.
- Investor Profile. Generally to protect funds, day traders and other experienced investors.
Step 3. Using a broker
Use the same broker as a stockbroker or common mutual fund to buy shares in a gold mutual fund, such as the GLD and IAU on the New York Stock Exchange. A gold mutual fund is designed to monitor gold prices, while maintaining stock liquidity.
- Note that with gold mutual funds, you cannot physically manage gold. Therefore, some gold advisors do not like this method.
- Another disadvantage is that gold mutual funds trade like stocks and you may have to pay a commission to open a buy or sell position. Furthermore, any capital gains you make must be reported and you must pay taxes.
Method 5 of 5: Regarding Gold Investment
Step 1. Determine why you are investing in gold
If you have the funds to invest in, it's important to understand why people invest in gold, so you can make sure it's the right thing for you. Understand that gold is generally used as a store of value and as an investment hedge. The main reasons to invest in gold include:
- The demand for gold is always high. Gold is a tangible object that can always be traded without the need to consider its future popularity. Compare this to antiques and collectibles, whose value depends on fluctuations in fashion and trends.
- Owning gold can protect you from a weakening currency or from inflation. Many countries started investing in gold when economic growth began to decline; the more debt an economy has, the higher the price of gold.
- Gold can be your "weapon" when you want to diversify your investment portfolio. Diversification is considered the best reason to own gold, according to financial experts. This ensures strong financial management, and does not risk all your investments in one place.
- Gold is a powerful way to protect wealth over a long period of time (provided you keep it safe).
- During times of civil instability, gold is a way to protect your assets, as it is easy to carry and hide, and you can use it when all your possessions are lost.
Tips
- Since the price of gold usually has a dramatic cycle, depending on the various factors involved in its supply and demand, it is quite difficult to value gold in conditions of a continuously depreciating paper currency. One way to value gold is to compare it to stock prices, which are usually easier to value (book value, earnings strength, and visible dividends). Take a look at the Dow/Gold ratio from 1885 to 1995:: https://www.sharelynx.com/chartsfixed/115yeardowgoldratio.gif. The Dow/Gold ratio is the ratio of the Dow Jones Industrial Average ("Dow") to the price of gold per ounce, or how many ounces of gold the Dow can buy. A high Dow/Gold ratio means high stock prices and low gold prices, while a low ratio means high gold prices and low stock prices. If we look at the chart above and the curve that tends to rise, it can be concluded that stocks can buy more gold in the long term (for example, in the lifetime of the investor), in other words Stock is a better long term investment than gold. However, there have been long periods where gold has outperformed stocks, such as in 1929-1942, and 1968-1980. People who bought stocks at its peak in 1929, when the Dow/Gold ratio was nearly 20, still didn't get their investment back compared to gold until 2011 when the Dow/Gold ratio was around eight. On the other hand, investors who were afraid to buy stocks and bought gold at the height of the 1980s, when the Dow/Gold ratio was nearly one, missed out on the opportunity of a lifetime to multiply their money at least eightfold. To avoid such mistakes, you can look at the Dow/Gold ratio: buy stocks and sell gold when the current Dow/Gold ratio is well below the historical trend line (which averages at 20 today, and continues to rise), and sell stocks and buy gold when the Dow/Gold Ratio is well above the historical trend line.
- The term "carat" refers to mass, while "carat" refers to purity.
- Collecting antique gold can provide an advantage based on its historical value; however, you can get stuck with legal issues, including obtaining ownership permits, etc. Buying on the black market is not only illegal but unethical; most countries consider antiques to be the property of all mankind, not individuals.
- The commission value for gold futures contracts is negotiable.
- Don't pay too much for gold. Keep in mind that historically the price of gold has hovered around $400 an ounce, taking inflation into account (see gold price chart for 650 years here: https://www.sharelynx.com/chartsfixed/600yeargold.gif), but during periods of uncertainty or economic downturn, the price usually goes up, which will cause a bubble. As the economy recovers, the price of gold will return to its normal price.
- Buying solid gold is restricted to weekdays during the weekday 9am – 5pm EST.
- If you store gold at home, invest in a safe that is reasonably safe and takes good care of it, for example, nail your vault to the floor where it is not visible from the outside, do not record the key combination in a Post-It on the side of the vault, etc. A sizable, fire-resistant safe is usually cheaper than an ounce of gold ($1694/ounce as of September 5, 2012), and can be used to store important documents like passports, Social Security cards, etc.)
Warning
- Don't tell people that you invest in gold. This can tell you that you have it in your home, or somewhere equally dangerous. Only tell people who need to know, such as spouse, heirs, etc.
- You will pay a fee for the "collection" coins. Suppose a collectible coin has two separate parts: its gold value and its collectible value. There is no guarantee they will move in the same direction. If the value of a coin comes primarily from its collectible value, consider whether you want to invest in coins or collectibles.
- Never pay well above the market price for gold bullion (usually, a fee of more than 12 percent above the base price of gold is too expensive).
- As with any investment, be prepared to lose money. The value of a commodity like gold will fluctuate over time and a decline in the value of your investment is a possibility. Consult a financial advisor before investing in something you are not very familiar with.
- Gold is expensive, and storing it in bulk requires you to think about its safety.
- Make sure you can tell that the gold you are buying is genuine.
- Gold does not produce results by itself (such as paying dividends, or in other ways to generate income such as stocks or bonds other than changes in the price per ounce. Owning gold is the same as saving for the future, but you still need to make sure that you always do proper money management. good.
Sources and Quotations
- https://bullion.nwtmint.com/gold_krugerrand.php
- https://moneycentral.msn.com/content/invest/extra/P143352.asp
- https://buying-gold.goldprice.org/
- https://moneycentral.msn.com/content/invest/extra/P143352.asp
- https://goldprice.org/buying-gold/2006/01/gold-etf.html
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https://www.investopedia.com/articles/optioninvestor/09/midas-touch-gold-investor.asp
