Best Ways to Buy Gold for Investment
Since time immemorial, gold has been viewed as a symbol of wealth and status. It held tremendous value among ancient civilizations for its relative scarcity and its use in crafting elegant pieces of jewelry, ornaments, and other valuable things.
Gold has retained its value over the years, with people utilizing it for different purposes. Among investors, Gold is used as a safe haven in times of economic uncertainty and as a way of diversifying portfolios. Likewise, collectors use Gold as an avenue for accumulating wealth, while fashion experts use Gold in creating beautiful clothes and accessories. One thing these people have in common is their ability to acquire gold that fits their requirements. As an investor, you too should be able to buy gold that fits your investment plan.
Here are the best ways to buy gold for investment.
Gold Bullion
Gold Bullion is a “physical way” of investing in gold and usually appears in the form of bars and coins which can be bought from dealers and online sellers.
Some characteristics of gold bars and gold coins are noted below;
- Buyers retain physical ownership in Gold.
- Their recommended gold purity level is 99.5%
- Each gold bar and gold coin have its manufacturer identity, and weight class engraved on it.
- Insurance and storage cost is covered by the buyer.
- They can be sold back to dealers and retailers.
Gold Certificates
Gold certificates are securities that track the development of the gold price. The value of each gold certificate is always dependent on the price development of its underlying asset, i.e. the price of gold.
By purchasing a gold certificate, investors do not become owners of gold in any way, they only participate in the development of the gold price. With the purchase of a certificate, the issuer also takes on counterparty risk. In addition, it is not transparent for investors which type of gold they are investing in. Where the issuer of the certificate goes bankrupt, the product is very likely to lose its value.
Gold Exchange Traded Funds (ETFs)
When investing in gold exchange-traded funds (ETFs), the investor buys shares in an investment company that invests all or part of its assets in physical gold. This fund aims to show the performance of gold after the deduction of commissions and costs.
ETFs offer a clear cost advantage compared to physical gold. The spread between the bid and ask price is significantly smaller. The running costs are also usually lower. In addition to an administration fee, the investor has to pay security and custody fees as well as trading costs.
A risk that cannot be ruled out even with physically replicated ETFs is the possibility that the bank will not hand over the gold in the event of a systemic crisis. Since the precious metal is deposited with the financial institution, access can be denied in extreme cases.
Gold Equities
You can also participate indirectly in the gold rush by buying gold mine shares. Trading in shares is very liquid, which means that the difference between the buy and sell price of the stock is negligible. When the price of gold rises, shares usually benefit disproportionately. However, the risk is significantly greater because these mines are not only affected by the development of the gold price but also involve stock market risks. Thus, the general mood in the financial markets can have both a positive and a negative impact on performance.
Strikes, energy shortages, environmental degradation, and mismanagement are other threats gold mining companies face.
Would you like to find out more about investment opportunities in gold? Contact TRB Bullions for a personal consultation.