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Why investing in gold is crucial

The global financial markets are volatile and experience crisis. Therefore, investing money in them are somewhat of a risk due to the unpredictable nature. The price of gold, however, is independent of these markets and hence are a good investment to invest in gold. The future of investment lies in gold. The ultimate tangible value of gold as the basis for real value, whether acknowledged by banks (central) or not, will never change. The ignorance to invest in gold in the world currently is a cause for confusion as well as uncertainty. Once a person understands the nuances of gold investment and the methods of how to invest in gold, it is fairly simple to align the purchase with the goals. Below are a few methods for you to invest in gold:

  • Direct Ownership
    Being in possession of physical gold in the form of coins, ingots, bars, etc., For many investors, there is nothing more alluring than to invest in gold in any of the above forms. Bullions are being manufactured by government mints as well as private mints, and it can be bought from dealers who are affiliated with the mints. The benefit is that the investor is the sole owner of the gold without any intermediary. The value of gold cannot be changed or controlled by governments. The value of gold will be never lackluster, so to speak. But, it is also the owner’s responsibility to invest in gold and store the gold in a secure location. The other downside to this is the fact that, the investor may not get the full value for his gold during the time of selling as the dealers charge a premium.
  • Gold Exchange-Traded Funds
    If an investor isn’t looking to buy physical gold, gold ETF’s are the way to go as they offer more liquidity. The benefit of having ETF is that it can be bought or sold anytime that the stock market is open. The ETF’s portfolio is fixed in advance and cannot be changed. Also, the transaction costs are lesser when compared to buying or selling bullions. However, it should be noted that ETF is just a financial asset and do not give the investor an actual claim to the physical gold.
  • Gold Futures Contracts
    This is a low-cost alternative for investors who want to control a lot of gold, though, it comes with special risks. Investors with lots of experience and insight normally invest in contracts. The contracts come in units of 100 ounces and are worth $130,000 (at current prices). To open a position, an individual needs to invest a small initial margin and maintain a minimum margin level. This offers investors some leverage; however, the investor will have to bear the losses of the full value of the contract. In some cases, additional payments may have to be made to cover the losses. But, the rewards outweigh the risks for many investors. The downside to this is the contract expires in a fixed period. So as the expiration date draws closer, the time value disappears on the contracts.
  • Gold Mining Stocks
    These are active businesses whose stock prices can rise depending on the success of their operations. A large, well-capitalized business with a profitable track record is known as a senior. These companies have been in the mining business for several years and owned most of the mines and produce known amounts of gold. The stock prices also depend on the price of gold. To invest in gold doesn’t produce any income and hence, many investors prefer to invest in the mining stocks. The stocks see a rise which is more than the value of gold when the prices of gold are high. The downside to this method is sometimes the stocks take a plunge even though the prices of gold are high due to some catastrophic incident in the mining company (accident, or failure of promising exploratory effort). Also, when the price of gold falls, the stocks have greater downward volatility.
  • Gold Streaming Companies
    Companies that provide finance to mining companies are called gold streaming companies. They do not mine gold. Buying shares of such companies is a hybrid way to invest in gold. The streaming companies have exposure to the price of gold as well as continuous income flow from their financing arrangements. Even though the yield in a company is less than the market averages, the stocks pay better than the gold mining stocks. The share prices fall when the gold prices reduce. Poor industry conditions bring new opportunities for potentially high paying financing deals which is good for the company.

Reiterating the point made before, there are multiple choices to invest in gold, but it also depends on the investor’s goal. Knowing the differences between the different types of investment currently offered in the market one can make an informed and good decision.

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