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Author: bmotrader   |   Latest post: Sun, 24 Oct 2021, 8:42 AM

 

Things to Keep in Mind Before Investing in Gold

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Any investment mogul will tell you how wrong it is to put all of your eggs in one basket. As such, portfolio diversification is one of the best things that you can do for your hard-earned money. When it comes to adding more assets to your portfolio, people will suggest going beyond company stocks. What should you invest in instead?


Source: https://pixabay.com/photos/gold-bars-wealth-finance-gold-bars-163519/


The commodities market is a good area to place your money in. As compared to the stock market, commodities are always there. Their price is affected solely by supply and demand. There are quite a few commodities you can invest in. One commodity that’s always under the radar of investors is none other than gold.

What Is Gold?

Gold is a highly valuable metal that’s mined in many parts of the world. The most common use for gold is that it serves as a standard monetary system in some countries. When mined, gold is stored as bullions which can then be melted and used in many other ways other than a monetary unit.


As we all know, gold is also vital to the jewelry industry and is used as the base for necklaces, rings, bracelets, and more. Gold can also be beaten into very thin sheets which can be used for art, decoration, and architectural ornament. Until recently, there is such a thing as edible gold which you’ll usually find in high-class restaurants.


Due to its conductive properties, gold is also used as a material for electronics. You can find gold in watches, smartphones, gaming consoles, and many other gadgets. As you can see, the demand for gold is always there as it can be applied in many ways. At its very core, however, gold will always be a symbol of luxury.


As the demand is always there, there are many investment moguls that add gold to their portfolio. It’s one of the easiest commodities to get into. Alternatively, you can just buy gold and then resell it once the price goes higher. You wouldn’t want to dive into gold investing without prior knowledge though. 


Treat it as you would any other investment plan that you are thinking of. It’s a must that you are well aware of what you are getting into so that you minimize the risks of losing out on your investment. Here are a few things that you need to know before you begin investing and buying gold.

Getting Into Gold

Saying you want to invest in gold is such a broad statement. You don’t simply invest in gold. There are actually many ways to do so. This means you can find ways through which you can invest in the commodity that’s right for your budget and what’s right for what you know.


In general, there are four ways to invest in gold. The first is that you can invest in gold directly. Gold is bought in blocks called bullions and they can be bought and sold in many places. When doing this, you are basing your investment directly on the price of gold and nothing else.


Alternatively, you can buy shares of a mutual or exchange-traded fund related to gold as well. When picking this option, treat it as you would any other mutual or ETF but make sure to consider the latest developments on the market before buying shares. These affect the price of said shares.


You can also trade futures and options in the commodities market. This is one of the more common ways to invest in gold. If you aren’t familiar with this field, it’s best that you hire an experienced broker first. Investing in commodities doesn’t differ much from investing in companies so there’s not much there is to know.


Last and possibly the easiest way to invest in gold is by simply investing in companies that mine gold or manufacture gold. If you’re used to investing in companies, then this is perhaps the best way to get into gold. Treat it as you would any stock on the stock market.

Determining The Price Of Gold

There are many factors that affect the price of gold. For starters, you have to consider how pure a bar of gold is. Obviously, the purer the gold, the higher the price. Other than that, you also have to consider that the price of gold will depend on market rates too. 


These change on a daily basis and they are subject to volatility, depending on current news and the supply of gold. The good news is that it’s very easy to find the gold prices for the day. There are many international platforms that show updates on the latest prices in gold. Make sure to check these out before you invest in gold. As always, it’s always better to buy when the prices are low so that you can sell for a profit when the prices increase once again.


When buying gold directly, you aren’t going to be charged per piece despite it looking that way. Gold will always be sold by weight and not by the piece. Whether it’s a gold bullion or a gold coin, gold traders will always weigh it first before giving it to you.

Study Gold Miners Well

Gold doesn’t come out of anywhere. It has to be mined first and that job is up to gold mining companies. When investing in gold, you can opt to invest in the companies that get them. If you are investing in gold directly, it’s a must that you learn more about the companies involved still as they can determine the supply of gold in circulation.


If you want to invest in gold companies, one of the first things you should look for is reviews of them. As you would when investing in regular companies, for gold, you should read which companies earned the best reviews too. Aside from having a steady supply of gold, the best gold mining companies should do a host of other things.


For starters, mining companies should have a stable source of gold. You can find most mining companies releasing press releases about new gold mine acquisitions. This is important as this basically dictates whether or not they can directly supply gold within the coming years.


Aside from that, it’s also a must that the companies are environmentally-responsible. Mining is a practice that depletes the earth’s natural sources.  That alone could cause people to avoid investing or supporting a mining company. For these companies to move forward, they need to have practices that leave very little impact on the environment.


Source: https://pixabay.com/photos/gold-ingots-treasure-bullion-513062/


People love investing in companies that are socially responsible. This is even more important when it comes to companies that mine the earth’s resources. With the improving technology surrounding environment-friendly mining, companies have very little reason to not be responsible miners.


Consequently, you need to understand that negative actions from the mining company will affect them as well. If they don’t have a definite source of gold, they won’t be able to meet the demand properly. If they have bad mining practices, this will reflect on their standing as well. As such, reviewing gold companies is one of the best things you can do to keep your asset safe.

Storing Gold

If you are buying gold bullions or coins, it’s a must that you store it in a secure location. You can store and hide the gold in your own home. When doing this, however, make sure that you store it in a safe that’s well-hidden, and that’s out of exposure from moisture and leaks so that it doesn’t get damaged.


However, the best way to store gold is by simply storing it in a safety deposit box at your local bank. Aside from this being the safer alternative, you can get insurance for your prized gold as well. Should anything happen to the gold, the bank will be held accountable for it.

Why Investors Love Gold

You’ll hear from a lot of investors that gold is a good investment. There are many reasons why this is the case and one of them is the fact that gold is a hedge against risk and against inflation. In the case of a stock market crash, gold will remain safe as it is a commodity after all. It’s good to keep in mind that gold will move inversely to the US dollar. 


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On the other hand, it’s worth noting that gold doesn’t always move inversely to the dollar. It can drop at the same time as the time stock market does but this happens rarely. The best advice we can give you is that you need to understand that gold isn’t immune to major downturns too.


As always, it’s important that you be careful when investing or buying gold. Even if it is a great commodity to invest on, it’s still subject to price drops and volatility every once in a while. If you play your cards right, gold can make you rich in a matter of time. If you are going to make your first investment in gold, it’s always best to be careful and cheap first.


 

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