Buying Gold: A Guide
Buying Gold: A Guide
Buying gold as an investment can be a tricky move and can cost you too much if done incorrectly. Let us tell you how to buy gold to enjoy high returns and prolonged financial safety.
Owning gold is considered to be a significant investment. While it may seem very difficult to secure gold bars at home in your personal vault or in a bank locker, it is possible and totally doable. Here is a quick guide and tips on how you can buy gold aka gold bullion for investment purposes.
Gold can be normally bought as a trade futures and options in the commodities market or through ETF, but investors can physically own a gold bar rather than owning an Exchanged Traded Fund (ETF) or mutual fund. It can be purchased at spot price, which is the price of un-fabricated gold plus the additional costs. These gold bars can be sold and made liquid in any event or in the time of economic recession.
So, now the main question arises: how to buy gold and make sure that all the necessary things are kept under consideration for the security and safety of your asset? There are different options available for you to choose from when it comes to investing in gold. We have briefly discussed them and have also added some extra tips for your guidance.
Process of Buying Gold Bar:
The process of buying gold is purely simple and just like any other commodity, you contact a physical retailer or a website like APMEX, JM Bullion, WholesaleCoinDirect.com and many more. Once there, you can select your desired weight, price and quantity. Just like with any other commodity, you will get discounts from the seller if you buy in a large quantity or if you have a good relationship with the seller.
Once, the gold bar is delivered, it is up to you to save it however you want. You may keep it in a safe lock or put it in your bank security deposit box or locker.
Make sure the retailer is safe and your money is secure while making transactions.
Make sure you do enough research on different retailers so that you don’t get ripped off
Make sure the gold is pure and is at least 99.5% pure gold. There are many scammers who only conduct gold wash on metal and sell that as pure gold.
Make sure the gold bar has the manufacturer’s stamp of its weight, name of the manufacturer and the purity of the gold.
Process of Buying Gold Funds:
Buying a fund of gold through mutual fund or ETF can be more convenient for investors than keeping the physical bars or coins. A fund saves the investors from additional costs of storage, insurance and other costs and funds are usually more liquid and a low cost entry in the gold market.
The price of these funds are a result of price movements in physical gold bullion. So these prices are volatile and change very often, thus providing more appreciation potential on funds, which is generally not available on gold bars.
Make sure you do some detailed research on the company you acquire the fund from, because your ETF or mutual fund is only as good as the company that backs it up.
The number of companies issuing these funds are very limited, so make sure you choose the best one.
Keep in mind that these funds are volatile in comparison to gold bars in times of recession.
Buying Gold future options:
Gold future option represents the right, not obligation, to trade the Gold at a specific time for a specific amount. These options are used to buy or sell the gold if you think the price of gold will rise up or fall down. If your estimation is wrong, the maximum risk with buying the option is the premium you paid to enter the contract.
This kind of investment requires deep knowledge and understanding and is not suitable for every investor. These options can be traded through a normal brokerage house which has approval of options trading. This investment type requires relatively small up front capital.
The options are highly liquid, thus giving security over other methods of owing gold.
These options are on contract basis and are thus time based, so make sure you enter the contract that best fits you.
Buying gold mining stocks:
These gold mining stocks are part ownership of companies mining the gold. These companies mostly correlate with gold prices. However, the return on investment is proportionate to the earnings and performance of the company and not just the value of the gold.
An investor in the gold mining stock has to be speculative about the gold prices, the performance and financial indicators of the company, the share price of the company, and the impact of external factors of the price of gold such as oil prices, geological events, natural disasters etc.
These stocks are more liquid and easier to sell than a gold bar or coin.
Since you never get the hold of the physical gold, make sure you do in depth research on the company you own stock of.
You will also need to keep in mind the impact of other commodities on these share prices and their movements and derivatives.
The best option for buying gold as an investment depends on your own goals, risk tolerance and return objectives. If you are looking for portfolio diversification, then an ETF would be best suited to you, if your goal is to have recession protection, then owning physical gold like bars and coins would be more suitable for you. Use our article guide and make wise decisions when you decide to invest your hard-earned money in gold as an investment.
Make sure that whatever method you opt to use for your investment utilizes your savings and not a loan. Also make sure that the money used for investing is not needed for at least five years. This will make sure you justify your investment.