New ways to invest in gold and other precious metals are appearing all the time. Whether you’re a complete novice, or someone who already has experience using gold as a method of wealth protection, opportunities abound. Please consider the following methods for how to invest in gold and other precious metals, and also review some of the advantages and disadvantages inherent in these methods.
As a result of the current global climate, and the monetary policies of the Federal Reserve, conscientious investors realize that portfolios that are loaded with stocks and paper currencies are increasingly becoming more and more precarious.
As a result, cautious and forward thinking investors are reviewing their position in gold and other precious metals. When it comes to wealth preservation, gold has always been a safe bet for the long haul, historically; the average age of paper currencies is a mere 39 years old. Gold has consistently been used as an investment tool and as a means of increasing purchasing power throughout the entire history of human civilization.
The tide started to turn after the 2008 financial crisis, and ever since then, there has been increasing growth in gold investment. This boost in demand for gold is a result of investors not necessarily wanting to “play ball” with the new economic policies by different governments across the globe. For the most part, the “powers that be” have exhausted all of their available avenues to economic growth. The only option they have left, is a radical debasement of their respective national fiat currencies.
The central banks of Japan, China, Australia, and various European countries are all manipulating the value of their currency in drastic ways that are unprecedented. These countries are engaged in what many analysts are referring to as a “race to the bottom”. It’s like Darwinism in reverse; the country with the weakest money wins. However, that’s just what it looks like at face value, and if you do your research, a different picture emerges.
The fact is that national banks and monetary authorities such as the Federal reserve are dropping the purchasing power of fiat currencies on purpose. Devaluing the money affects you, me, and businesses of all sizes. Once the damage is done, and the smoke clears, these same government entities will bolster the price of gold worldwide.
As a result, now is the time to get on the ground floor, invest in gold and other precious metals to protect your wealth. The current investment demand for gold is rising because smart investors can see the writing on the wall; they know that gold has ALWAYS been the hedge when fiat currency is being devalued.
Below, this video explains why the best portfolio managers invest in gold by maintaining 5% of their net worth in gold, no matter what the current price of gold is per ounce.
Ways to Invest in Gold and Precious Metals
There are various reasons that attract investors to choose to invest in gold as a way to gain positions.
Whatever may influence their decision, the main aspect of the idea is to learn the best methods that can be used to invest in gold and hold it as part of the broader investment portfolio.
There are a number of different available options in the modern investment models, from traditional to more innovative and the choice will depend on the investment objectives. Here are some of the common and proven methods that can be used to invest in gold.
How to Invest in Gold: Physical Gold Bullion Coins and Gold Bars
Purchasing precious metals such as gold or silver in the form of coins or bullion bars is considered as one of the most convenient and safest methods of investments.
Bullion investors have a good opportunity of choosing from a wide range of products when it comes to purchasing gold coins and bullion. This is because buyers have a variety of products under this investment option and they access top gold IRA companies who compete fairly to provide reasonable prices in the market. 1 Oz of gold coins have been traditionally highly preferred among investors, especially with the American Gold Eagles, Australian Kangaroos, South African Krugerrands and Canadian Maple Leafs.
However, it is always important to keep in mind that when buying physical gold, it is priced higher than the prevailing current price in the normal market. For this reason, it reflects the difference between the retail and wholesale gold prices. To make wise decisions, always request a Free Gold IRA Investment Kit. This takes the investor through a preparation on how to make bullion purchase and avoid or reduce chances of unnecessary premiums and fees.
The advantages of gold investing in physical bullion:
The government does not get to know about the investment therefore, privacy is guaranteed
It eliminates the risks associated with systemic collapse as the investor in fully in control of their trade deals
Investors get access to lower premium over spot
There are highest possible purity levels of gold in the market
It is impossible and hard to deal with counterfeit bullion coins due to unique serial numbers on each bullion coin
The respective governments issuing bullion coins recognize most of them as currency and hence can be exchanged for legal tenders
Disadvantages of gold investing in physical bullion:
Investors cover any storage cost
The process is not easy as the trade involved in “paper” gold
Investing in Gold Exchange Traded Funds (ETFs) and Mutual Funds
Investing in Gold Exchange Traded Funds is a worthwhile investment as it guarantees you money.[/jumbotron]
From the time of its launch, precious metal EFTs have been accorded high amounts of capital by the gold investment community. The trade of EFTs is less the same feeling and trading of usual stocks with a tight bid-asks spreads, making it commonly speculated by investors within a short time frame.
Since the introduction of GLD to the market in 2004, it has become one of the common gold that is backed up by EFT in the market. The stock trades at an average worth of $670m shares on a daily basis.
The trading of EFTs is of a matter of convenience as seen in a trading view, however, some of the EFTs elements are seen with caution: in most cases the EFTs signify unallocated claim on investing in gold conflicting with direct ownership. This statement is always overridden by most investors, but in reality it can go out of hand, leading to the systemic crisis in any financial system.
There are some unclear clarifications as to how successful will the EFTs systems be if there was to be a competition for the basic physical commodities.
Advantages of Investing in Gold ETFs:
Gold ETFs are easy to trade, no need of storage space as they are not invested in a “physical gold” form.
Cons of Investing in Gold ETFs:
Gold EFTs do not offer any protection in any case if there is a systemic collapse, lack of physical ownership of the physical metals, and they are not backed by real gold.
Investing in Gold Mining Stocks
The most common way used by investors in buying stocks listed on the stock exchange by miners is buying direct equity stakes. This also is a way of gaining exposure to the gold by investors. Accessing and buying gold mining activities through listed stock exchange allows an investor to take the advantage of the gold mining activities arising from the companies and any other future reserve upgrade in the course of exploration activities.
Investing on equity assures an investor of capital appreciation and dividend payout. Those investors with a comprehensive brokerage account have the advantage of buying gold from any gold related company in the world. Investing in gold mining stocks attracts a significant risk as compared to physical gold, thus investors should be smart when handling this form of investment.
In most cases, mining companies are not obliged to track gold prices; this means that when the gold prices begin to fluctuate, there is no assurance that the gold mining stocks will follow suit. The mining activities are highly volatile; they face many regulatory procedures and the ever-changing input costs.
Pros of Investing in Gold Mining Stocks:
They are traded easily; lack the need to store as they are not invested in physical gold.
Cons of Investing in Gold Mining Stocks:
Gold does not link perfectly with the stock market as compared with gold mining stocks. Yale conducted a study on “The Pros and Cons of Gold Mining Stocks”; (57% of stock market with 40% of gold, you will all the details as you study here.) Stock guarantees no security or protection if the systemic collapse occurs and there is the lack of physical ownership of the metals.
Investing in Gold Futures and Options
Another popular choice among investors with less time at their disposal is investing in gold futures and options, which is basically a set of derivatives based on the price of gold.
Contracts such as this are also utilized by large institutional investors to hedge their exposure to price fluctuations with gold. The COMEX, a United States company, houses the most active contracts involving the sale of gold futures and options, with an estimated 200,000 of these said contracts being transacted daily.
This is equivalent to over 20 million ounces worth of gold – a staggering amount of the stuff (That is, if it’s really there). When investing in gold futures and options, investors hope to gain from the falling and rising of the price of gold dependent on what kind of contract they entered.
The main reason that the futures and options market is so attractive is that it lets investors leverage capital using the derivative market’s own margin system. By doling out a payment known as the “initial margin”, investors have better exposure than they would have gotten if they had gone through the cash markets.
The options and futures market has always been a source of contention in the gold investment community. A process called “naked shorting”, which is selling metal not in the ownership of the investor selling it, is often called out as the cause of distortions with the price of gold, because it places artificial selling pressure on the gold market.
Seeing as how fragmented the gold market is nowadays, a lot of futures and options are just traded through online brokers who take care of all the requirements for the connectivity, exchange, and margins for the investors.
There are a lot of options for investors who want to purchase gold to serve as a short-time investment – several have been discussed already, such as investing in gold futures and options, gold ETFs, gold mining stocks, or physical gold bullion.
However, a lot of investors have placed their interest in investing in gold for longer time periods, and they often seek ways to incorporate that gold investment in such a way that it complements their retirement plans. One can achieve this in several ways, with an Individual Retirement Account.
Pros of Investing in Gold Futures and Options:
You don’t need to fuss about storage, since the gold you are investing in isn’t actually physical gold.
Cons of Investing in Gold Futures and Options:
You aren’t entirely certain whether the gold you are investing in is backed by physical metals
No real protective measures in place in case the system collapses
No one involved actually owns any physical metals
Investing in Gold IRA (Self Directed IRA)
If you’re looking for the best options for long-term investing in gold with your retirement plan, consider a Self Directed IRA.
According to most reputable experts in this field this is among the most efficient and easy ways for investing in gold.
Even if you already have a retirement plan, that does not include gold investments, it is not an issue. IRS gives you the opportunity to an alternative IRA, which you can use for investing in gold and other precious metals. Furthermore there are opportunities to hold most gold and silver bullion coins or bars, if certain conditions for purity are covered. The list of coins includes a lot of popular options, such as American Gold Eagle, Canadian Gold Maple Leaf and others.
The law gives you a number of ways to proceed if you want to set up an IRA, and this includes the option to rollover from your current retirement plan (such as 401(k), 401(a), 403(b) and 457). You could also transfer for IRAs, but since there are a number of tax implications, you should always consult a specialist before making any final decisions about your investments.
Since investing in gold has been one of the most steady investment options in the past few decades, it is definitely one of the safest options for your portfolio. Especially compared to more traditional currency and stock markets, which have been uncertain and much more dependent on major economical and political events around the globe.
That makes a rather more diversified portfolio with investing in gold bullion included a much safer route and IRAs are one of the best way to achieve it.
Advantages of Investing in Gold IRA:
- tax-free investment;
- good long-term expectations;
- option to store in offshore vault (chose a gold IRA company that offers it);
- much safer than conventional investments such as stocks and currencies;
- high protection against counterfeit.
Disadvantages of Investing in Gold IRA:
- it has storage costs, since you own the gold physically;
- it’s harder to trade in comparison to virtual goods,currencies and trades.
As you can see, the main disadvantages are easily countered by the benefits of investing in physical gold. This makes self-directed IRAs a smart choice for your retirement plans, or even if you just want to enter the gold bullion market. It’s a long-term investment that might not bring quick profits, but will ensure your money is safe.