Investing in gold: 7 ways to invest money in gold
Investing in gold is popular all over the world for its value and rich history, and it is quite logical that people have been investing in the yellow metal since a long time ago. What are the ways to invest gold? Is investing in gold really profitable?
The main use of gold is in the production of jewelry, but it is also used in the aerospace, medical and electronics industries. Governments and central banks are the ones who buy gold the most. The United States of America has the largest amount of gold reserves in the world. Germany is in second place, and the International Monetary Fund is in third place.
On the other hand, retail investors buy gold for one of three reasons:
Hedging (hedges are investments that offset losses in another asset class)
Safe Haven (Safe havens protect investors from a potential economic disaster or crisis.)
Direct investing (Investors buy gold to take advantage of future price movements.).
The best way to invest in gold
Now you know some things about investing in gold and why individual and corporate investors, governments and central banks might buy it? In this article, we will review how to invest money in gold as a professional through 4 investment methods
1. Investing in gold bars and coins
How to invest in gold bullion: Bullion and gold coins are the most common form of gold possession for the purpose of investment. Gold bullion can be described as wholly or nearly pure gold, documented according to its mass and purity. Gold bars and coins are also linked with a serial number to identify them.
Heavy gold bars have a beautiful look, but they come with some drawbacks. The possibility of liquidating them or exchanging them for cash may be difficult sometimes. Gold bars are also fairly indivisible. So, if you want gold bars that are easy to buy and sell, you can choose medium or small sizes.
Investors can buy gold from major banks, and gold is not transferred from them in order to avoid security risks. Rather, it is done through paper contracts. India, China, England, Turkey and Italy are famous for this market.
2. Invest in Gold Funds (ETFs)
How to invest money in gold without buying and owning it? Investors who want to make profits from gold without actually holding gold usually invest in exchange traded funds (ETFs), which are among the flexible options offered globally. They are investment funds that include a variety of indices for the gold sector, giving Investors have direct exposure to the price of gold without taking possession of it.This investment is one of the easiest and least expensive ways to access the gold market.
An investor can buy shares in gold exchange-traded funds, and one share is equivalent to a certain amount of gold. Investing in gold funds is also beneficial for small investors in terms of reducing risks since the minimum investment in gold funds is one share.
Seeking to diversify their investment portfolio, some investment funds own large amounts of gold. However, a very small number of mutual funds invest only in gold. Funds such as ETFs only track indexes of gold mining companies, and therefore charge lower expense ratios than mutual funds. However, most investors prefer investing in gold ETFs and gold mutual funds as an alternative option to buying gold bullion.
3. Investment in gold mining
How do I invest in gold indirectly? Some consider that direct gold investment does not include growth potential, as an ounce of gold today will always remain an ounce of gold. This is why some investors have turned to stocks of gold mining companies and mines because they can expand over time, and investors can benefit from increased production.
The shares of gold mines and mining companies do not necessarily move in line with the prices of gold bars, but rather move according to the performance of companies and mines, as they rise or fall based on their operational performance and how to invest their money and make profits. Thus, investing in mining stocks is not without risk. For example, mines do not always produce the quantities of gold as expected, and workers sometimes strike, and disasters may lead to the collapse of the mine or a deadly gas leak that stops production and may even cost lives.
In general, the stocks of a gold mining company can do better or worse than the price of gold – depending on what is happening in that particular mine. Therefore, the decision to invest in shares of mining companies must be based on an analysis of the company’s financial performance.
4. Invest in gold futures
How do I invest in gold as an experienced and professional? A futures contract is an agreement between two parties to buy and deliver a commodity such as gold at a specified time in the future. In fact, the first futures contract was written in 1851 for the commodity corn and was introduced by the Chicago Mercantile Exchange. Futures contracts are an important alternative to traditional means of investing in gold such as bars and gold coins. Futures contracts are a highly leveraged and risky option that is not suitable for beginners. Even experienced investors should think twice here. Essentially, a futures contract is an agreement between a buyer and seller to exchange a specified amount of gold at a specified future date and price. As gold prices go up and down, the value of the contract fluctuates, with buyer and seller accounts adjusting accordingly. is trading
Futures contracts are generally on stock exchanges, so you will need a (brokerage firm) that supports the purchase of gold futures contracts.
Futures contracts are usually purchased for only a small fraction of the total contract cost. For example, the investor may only have to pay 20% of the full cost of the contract. This creates leverage, which increases the investor’s potential gains and losses. Since contracts have fixed expiration dates, you cannot simply hold on to a losing position and hope that the price will rebound. Futures contracts are a complex and time-consuming investment that can magnify both gains and losses.
Is gold investment profitable?
If you are buying gold as part of your portfolio diversification strategy, ETFs are the best option. If you want protection in the event of an economic crisis or any disturbances that may threaten the financial and monetary system of your country, you will need to own real gold and not stocks or paper gold.
Gold should not be purchased as your only investment, gold by itself does not produce any value and its price can have high peaks and low troughs and this makes buying gold as a sole investment very risky for the average individual investor.. Therefore gold investment should be included with other commodities such as oil, commodities and investments in other fixed assets.
Investing in gold has a good reputation as it is an asset for preserving wealth throughout history, and investing in gold is still a suitable way for those who have great wealth and want to preserve it against the actions of central banks and the impact of inflation. Despite the fluctuations in its prices, it maintains its value in the long run, and that is why financial advisors often recommend making it part of the investment portfolio.
Whether for investment or savings, which method is right for you depends on the amount of money you want to invest, your investment goals, and the amount of risk you can take.
Factors affecting its price?
In addition to the fact that gold is subject to the law of supply and demand like any other commodity, it is also subject to price movement and the behavior of investors and traders in the financial markets. On the other hand, unlike the paper currency that suffers from inflation and the erosion of its purchasing power, gold is not subject to inflation and its value is fixed, and production and mining operations do not greatly affect its price and value. Therefore, investors protect themselves against inflation by investing in buying gold as a store of value.
The demand for gold investment always increases in times of economic turmoil and crisis because investors are looking to protect themselves and turn to safe havens.
Central banks are also a major factor behind the price of gold especially when foreign exchange reserves become full, the central bank starts dumping some of the gold as it is a non-productive asset and does not generate any return for the economy.
The relationship between the price of gold and the strength of the US dollar is an interesting one. The lower the price of the dollar, the higher the price of gold, and the higher the price of the dollar, the lower the price of gold.
Investing in gold in other ways
Some may choose to store gold in the form of ornaments and jewellery, but it is not the best way to invest gold for several reasons, including that the price of the gold piece depends on the design, implementation and other stones added, so there is no direct and accurate relationship between the price of an ounce of gold in the international markets and the price of the products Made of gold. Rather, it is better to invest in raw gold bars.
It is possible for gold prices to go through financial bubbles as a result of the fluctuation in the purchasing power of the dollar, and it is possible to speculate on gold prices, such as speculation on stocks, and gold investment is not without risk and the loss of part of the capital.
Here are 3 other ways in which an individual can invest in gold:
Gold coins:
It is manifested in gold coins and is included in its evaluation, in addition to its weight and quality of gold, its artistic value and rarity. It is often sold at a price higher than the gold market price, and it is also very suitable for art collectors.
Paper gold:
It is manifested in paper gold, and it is one of the most effective and economical ways to buy gold in an intangible way, as shares in gold calculated on the basis of an ounce or a gram, and there is often a fixed ratio between the gold gallery and what it represents of physical gold.
Gold deposit certificates:
It is also possible to invest in gold through gold deposit certificates, which are certificates issued as an alternative to actual gold (investment in gold bars, for example) that allow the investor to buy or sell gold at its specified price daily without the need to buy or store gold. It is also issued in multiple categories, and it is redeemable for its value. cash or as gold bars.
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