Before I go about with the post, a disclaimer. We do not have gold invested in such a variety of ways that I am going to describe here. Our gold is entirely in Jewelry form. As you might have heard by now, India is one of largest gold buying countries in the world. The reason being a social culture, where gold is given by the parents to their daughter on her marriage. It’s a social custom.
There, as soon as a daughter is born, parents start buying gold for her future marriage. No wonder that in our marriage SMB got lots of gold. We had to open a bank safety locker for their safe keeping. Apart from the jewelry, we used to own gold ETFs which we sold off last year, fearing about a gold bubble, after almost doubling my money in 4 years. But, the sad part is gold is even higher now.
I am not complaining for that, I can’t sell at the peak, no matter how hard I try. No one can time the market correctly. We are happy we sold off our position at a fantastic profit. And we have all our jewelry intact which we will probably not sell ever. Let’s now begin with the rest of the article. This may be useful to you if you are looking for gold investing in near future.
Gold is one of the most lucrative and safe investment options, provided we are not in a gold bubble. If it’s in bubble we will only know about it after the burst, that’s the irony. While you are looking at gold, it may be wise to look at if silver is a better investment, or you can compare gold vs. silver as investment option.
Gold is a Wise Investment Choice
What makes gold so valuable that you would want to invest in it? Gold is the most popular precious metal exchanged on the commodities market. It is recognized the world over and has been used as a form of currency throughout history, giving it both a solid and respectable reputation and the longevity of being a constant companion to the financial markets of every international community.
John, my personal investment guru explains, “Gold investments offer investors a hedge against tough economic or political times.” Given the current global climate we live in today it stands to reason that gold commodities would be a wise investment for your money.
Various Ways to Invest in Gold
Let’s take a look at some of the reliable sources for investing in gold commodities.
Buy Gold Bullion Bars: Although bullion bars generally offer lower price premiums than other forms of gold commodities, and carry an inherent risk of forgery, when purchased from an approved source such as the US Mint, the bars are weighed, measured, tested and authenticated as being the genuine real deal.
Gold Coins: Gold bullion coins are a common commodities possession among gold investors. Bullion coins are priced by measuring their fine weight, and adding a premium depending on supply and demand of the current market. There are several countries that have gold bullion coins for sale or trade on all of the commodities markets.
Purchase ETF’s: Exchange Traded Funds are also golden opportunities of investment. Buying ETF’s offers the investor the opportunity to own or gain exposure to gold prices without actually having to store physical items like bars or coins.
Gold Certificates: These certificates can be purchased to represent allocated or un-allocated gold purchases. Allocated certificates are directly associated with a numbered bar kept in a vault of the financial institution of issuance, whereas unallocated certificates pose a higher risk by being issued for pooled resources of gold, the price of which can be affected if there is a run on that institutions reserve of gold.
Jewelry: I am sure women readers wold prefer this route most. But, to me buying jewelry as gold investment in this country (high service and manufacturing fee) is a bad decision compared to other world markets where cheap labor reduces the jewelry making charge. Remember when you buy you pay the price of the gold and cost of manufacturing. And, when you sell, you get only the cost of the gold back.
Fraudulent Gold Scams to be Aware of
Of course, as with anything involving the use of currency there are some cleverly disguised scams out there designed to take your hard-earned cash and leave you with very little in the way of real gold for your purchase.
One of the things I have learned to look out for are the Cash For Gold companies that have sprung up all over the country. These companies offer to buy your gold from you or offer to sell investments in gold bullion or coins. The ownership of these companies is seldom able to be verified and many of them are under investigation for committing securities fraud.
Be on the lookout for High Yield Investment Programs. These are often tied to pyramid schemes and have no realized value to support them. You should also be wary of Advance Fee Fraud techniques, which involve SPAM email that offer unrealistic expectancies for a small investment fee.
Gold dust sellers are another bunch to watch out for. These scam artists offer clients the opportunity to purchase valuable gold dust at a fraction of the current market value, enticing investors to spend their money on a product that ends up being shavings from brass or another similar shiny metal that can be made to look like gold.
One of the hardest things to keep an eye out for is fake gold coins. Man has counterfeited currency ever since we began using coins as a method of making and receiving payments. This problem still occurs today and with more frequency. If you aren’t a numismatist then you should consult one before spending thousands of dollars on a coin.
Where to Purchase Gold from
The most obvious answer is you can do what I did and hire an investment broker to help you make the best decisions for your financial portfolio; however there are ways you can go about investing your money in gold without paying a middleman a percentage for their efforts.
You can contact the London Bullion Market, which offers services for gold investors that allow them to purchase their gold and store it in one of their vaults, maintaining a chain of integrity for future sales or trades.
Purchasing gold bullion coins, like the Kruggerand, which is the most widely held coin in circulation, is also a very wise investment of gold that can be done on your own with a little knowledge on how to identify, weigh and measure the coins value to prevent any counterfeit sales or purchases. They are normally offered through various commodities markets and are not found at your local coin dealer.
Do you own gold? What is your gold buying experience? And in which form you own gold?
There are lots of reasons NOT to invest in gold. These I got from the Stacy Makes Cents blog.
o Hard to value. The price goes up and down, but what’s a good price or a bad price for it? With companies, you can look at profits, assets, leadership team to get a notion of value.
o Not very useful. Only about 15 percent is used industrially. The rest goes into jewelry, which is non-essential. Also in a disaster, the demand isn’t for gold; it’s for food, drinking water, gasoline, clothing, shelter.
o No income potential. Gold pays no dividends that can be reinvested.
o Price is way high now. Buying gold at its highest price ever goes against the investing wisdom of buy low, sell high.
The argument that gold pays no dividends is the worst argument against cold that one could possibly make. Gold has outperformed the king of value investing and his company Berkshire Hathaway. Don’t believe me? Pull up a chart on Google finance comparing BRK.A and SGOL.
You’re thinking of gold’s price in nominal terms, adjusted for inflation gold peaked out at $2,337 in the 80s, gold is trading at $1,770 today, where is this all time speculative high you are referring to?
All the reasons you listed for “not” owning gold are easily refuted on both a quantitative and factual manner.
Honestly I see gold going much higher long-term. The devaluation of the US dollar is going to make more and more people see gold as a safe haven, and in turn there will be more demand for gold in people’s portfolios. At least that’s the way I see it.
How do you know about impending currency devaluation?
I have some jewelry, but most of it is not of high karat value and therefore not worth as much as I’d hope, so I’ll hold onto it for sentimental reasons…or until I can sell at peak :p Just kidding.
Haha selling at peak can never be achieved, I think. Our jewelry is also of sentimental value to us, perhaps we can never think of selling that.
I own a natural resources ETF that has some gold exposure.
I think some people who love gold wouldn’t love it so much if they knew that gold was actually about five times as volatile as the stock market. It’s funny that some use gold for “stability” in their portfolio, when there’s nothing really stable about it at all.
wow I didn’t know about it Joe. Five time s volatile..what’;s the time frame we are talking about? year, month, a decade or a century?
I don’t own any gold – other than my jewelry (it’s why I always buy a higher carat when given the option), but my dad is a BIG gold investor. He owns it every way you mentioned BUT through ETFs.
Does he have only gold in investment? If not you can remind her that gold is not very liquid asset. You have to give significant discount to the buyer if you need urgent cash for your gold. Off-course I am talking about bullion.
SB, I’d say physical gold is more of a hedge than an investment. Think of it as a put option, with no expiration date, on the destructive central bank policies around the world. If Bernanke is right, your equity portfolio will rise and your gold holdings will fall, that negative correlation is what you want and is by definition what a hedge is.
However, if Bernanke is wrong, your gold holdings – and any gold backed derivatives – will sky rocket and your equity and financial assets will plummet on an inflation adjusted basis.
I know who what I trust to protect in these volatile times, and it isn’t the head of some government or central bank.
Yes, Gold is more of a hedge against the collapse than an investment. In other words a healthy dollar’s worth in gold will be worth a great deal more than its paper counterfeit once the dollar loses its value. If I buy gold it would be just to maintain “something” from my savings should our economy fail.
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How do I sell them when I need the cash? To whom to I go?
This is pain for metal investing, Your investment is not very liquid. If you need money urgently, you are stuck. The best way for me worked out to own ETFs. There are gold companies that stores the bullion for you, when you decide to sell, it’s as easy, or as tough as selling your stocks to get the money out. It may take up to 7 days to get money back in your bank.
Great tips. Thanks for sharing ways to buy gold for investments.