Finance

How to invest in gold?

Ever wondered why gold holds so much value in the economy?

To answer this question, you must know a thing or two about gold. 

What comes to your mind when you think of gold? Precious? valuable? shiny? gold coins? Gold bars? Whatever your answer is from the above, that stands true for gold.

Unlike other resources, gold doesn’t get consumed or used up. If you have gold, that means you have it and it isn’t going anywhere unless you wish to give it away. So there is no issue with the demand and supply of gold. Gold has always been a prized possession since the early civilizations till the present-day stock market and will certainly hold its value for a long time. Apart from being used in making jewellery and being stocked up in bank vaults, gold has always been a reliable investment material. 

Why invest in gold?

Among the many things you can invest in, why should one invest in gold? If you have this question too, worry not! You aren’t the only one who had their share of doubts about investing in gold. First things first, unlike other things that you invest in, gold has a history against inflations and deflations in the economy. It can provide you security in situations of global uncertainty. Along with that, the demand for gold is ever-increasing. Historically, whenever there is an increase in the cost of living the demand for gold also increases. In many countries like China and India, gold holds utmost value as it is included in their traditions as a form of savings and as traditional jewellery.

The key points to take into consideration are that the value of gold increases even when the value of other currencies decreases. Although for a very short period of time the value of gold goes down, it always rises up higher than other forms of currencies in no time. It is an effective form of investment against the inflation and deflation of the stock market.

How to Invest in Gold?  

Now that you are aware that investing in gold is a good form of investment, let’s go ahead and look at a few ways in which you can make a reliable gold investment.

Physical Gold

Investing in Physical gold is one way to go. Holding physical gold comes in handy when you face difficult situations. As you already know, gold is a universal currency, having physical gold is like having an insurance policy that saves you on a rainy day.

Bullions

Of course, when you thought of investing in gold, investing in bullions might have been your first thought. Gold bullions usually come in bars that weigh from a few grams to ounces. On each bullion, the quality and the weight of gold are printed.  Since the price of gold is high, investing in bullions can be expensive. If you decide to invest in bullions, be cautious about where you get them and their quality. Pick a reliable dealer and always pay for delivery. 

Coins

Another form of investing in physical gold is investing in gold coins. These are comparatively cheaper than the Bullions. Common gold coins come in the weight of one to two ounces or less. The popular coins in the line of investment are the American Gold Eagles, the South-African Krugerrands and the Canadian Maple Leafs. If you choose to invest in gold coins, you can get them through the local collectors at good deals, but you should always be up to date on the market prices of gold.

Jewellery

While investing in Gold Jewellery, you should consider the risks associated, as you are not buying the metal in a raw form. You should take note of the quality of the piece of jewellery based on how many karats it is. The purity of gold is measured in karats, investing in 24-karat jewellery gets you a high ROI as it is 100 percent pure. Investing in 24-karat jewellery, will not only be a good investment for you but will also come to your help when you wish to resell it. Always buy gold jewellery from a reputable dealer and make sure they are providing all the necessary documentation at the time of purchase.

Invest in Gold miners shares

Investing in Gold miners’ stock is a more direct way of investing in gold. To do so, you should invest in the companies that mine gold, refine and trade it. You can invest in the stock through your brokerage account too. While investing in gold miners shares you should keep in mind that although the share price is related to the prices of gold, there is more to it. The value of the stock you hold is also dependent on the profits and losses of the company that you choose to invest in. But you can always benefit from the dividends paid by the company. To put it simply, even though investing in gold miners’ stock stands as a good investment choice, it also carries similar risks as in any other stock.

ETFs

Investing in Exchange-traded gold Funds is also one of the popular ways of investing in gold.

The prices of the ETFs or the mutual funds might not be in line with the stock market prices of gold. These Funds offer more liquidity and diversification than the physical gold and individual stocks.

Futures and Options

Futures and options are the riskiest among all the different types of gold investments.  In both futures and options, their value is based on the asset or security that they buy.

In a Futures contract, one will agree to buy or sell a certain asset on a certain date for a specific amount, no matter if the price of the object is above or below the specific amount on the date of purchase. 

In an Options contract, one will agree to sell or buy an asset if the price of the asset reaches a specific amount before or on the set date.

If you choose to invest in gold through Futures or options, you can do so through online brokerages by creating an account with them. You should always monitor your gold stockings actively so that you can make use of them before the contract expires.

In Conclusion

Investing in gold is always a better option if you are concerned about the inflation and deflation of the stock market. But no investment is risk-free, neither is gold. Be cautious of your investments, check the gold prices, quality of gold and your investment options regularly and you are good to go.