Beginners Guide To Gold Investments

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May 31 2021
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Gold is one of the most precious metals on the planet today. Its luxurious lustrous yellow color makes it desirable to most people. It’s no wonder this flashy stone is used majorly in the production of jewelry.


For many investors, it seems to be an obvious choice when diversifying their investment portfolio. Its ability to keep its value and appreciate has earned it its place as a safe, stable and long term investment.


For some people, having this tangible investment is more appealing and reassuring than paper investments like stocks, bonds, and mutual funds. It is a metal that doesn’t rust; neither can it be destroyed in regular house fires as it melts at 1056 degrees Celsius. This is one of the physical properties of Gold that makes it loved by investors.


This type of investment has become much diversified. People can now invest in it without physically owning it, as was the case in the past. Owning it in its physical form however still remains the most common way of investing in it. The following options can be considered when investing in gold:


Buying Physical Gold

It can be done by buying small gold bars and coins. Over the last decade, these bars and coins accounted for one quarter of its demand worldwide.


When buying physical gold, coins are a better option because they can be easily liquidated for cash flow. Also, transporting them is less demanding than moving it in bigger forms like bullion bars. Bullion bars are heavier and require more human labor and security detail when transported.


Popular gold coins among new investors include the American eagle, the Canadian Maple Leaf, Gold Britannia, and the South African Krugerrand. If you fancy collecting this metal in its physical form, ensure they are insured and kept securely to protect your investment.

Beginners Guide To Gold Investments - Gold Bars

Buying Gold Exchange-Traded Funds (ETFs)

For investors looking for a more liquid investment for the precious metal, buying gold exchange-traded funds is the way to go. This type of investment saves investors the cost of storage, insurance, and transaction fees associated with buying it physically.


Investors of this type of ETFs own shares in publicly traded companies in the gold business. These ETFs are diversified investment portfolios that contain publicly traded assets like bonds, stocks and currencies. Their diversity makes them safe because the risk of investment is spread across all the assets included in the fund. Should one asset run a loss, the profit of other assets can make up for it. Check out https://www.nerdwallet.com/article/investing/what-is-an-etf to learn more about ETFs.


Buying Gold Jewelry

These are raw forms of the metal that have been processed with other precious stones into various shapes and sizes. Popular samples are rings, wrist watches, necklaces, and so on.

This type of investment poses a higher risk than investing in pure bullions and coins. This is because the price of gold jewelry increases significantly depending on the value of other precious stones added to them as well as the company responsible for their design.

Investors in this niche often pay three times the amount investors in the pure form of the metal would pay for a given weight. This is affected by a number of factors, one of which includes the value of other precious stones added to such jewelry.

Beginners Guide To Gold Investments - Chart

Opening a Gold IRA

This is a precious metal individual retirement account in which approved precious metals like gold, silver, platinum, and palladium are kept in the custody of a trustee, usually a bank. These metals are to be stored in accordance with the Internal Revenue Service (IRS) requirements.


The depositories where these metals are stored use high security features like automatic locks, motion and vibration detectors, and in extreme cases, retina scan locks which makes them theft proof.


Unlike privately buying and storing small quantities of this metal, an individual retirement account allows for a larger accumulation with state-of-the-art security systems. However, keeping this metal in an IRA does come with additional costs that include custodian and cash-out fees. But compared to the overall benefit of having this account, paying these fees is a good compromise.


The challenge with this investment option is that expert advice is needed at every step of the process. Beginner investors however, can turn to articles like metal-res.com gold ira guide for professional advice on how to set up and fund their own accounts.


Gold Futures and Options

Futures and options trading is a form of speculative investing. This makes it the riskiest of all forms of investment related to this precious metal. Futures or options investment requires an investor to have an account with a registered online broker.


Futures contract is an agreement that allows people to buy or sell an asset at a predetermined date and price regardless of the current market price. An options contract on the other hand, gives a buyer the option to buy or sell but unlike a futures contract, the buyer is not mandated to buy or sell the asset.


People that invest through futures or options have to constantly monitor their assets so as to buy or sell before they expire. Being a form of speculative investment, investors predict the price movement of the asset included in the contract. If the investor guesses wrong, the premium paid to enter the contract is lost.


Since this metal is rarely devalued, having an IRA for it is the safest form of long-term investment in it. People who intend to leave behind some wealth that can be passed down in the family to future generations should consider investing in gold and other precious metals that maintain their value while steadily appreciating with time.

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