A beginner’s guide to investing in gold
Gold can be a very useful way to diversify your portfolio. It is relatively rare, and often its value does not move at the same time and in the same way as other assets such as stocks or real estate. But the question is Where to Invest in Gold?
Gold provides insurance for your portfolio. Most people allocate about 5% to 15% of their portfolio in gold or gold-related investments
1. Investing in physical gold
Physical gold is worth now because it is a universal finite currency, held by most central banks.
In the same way that a family home should not be considered as an investment, gold bullion is not an investment in itself, rather a form of savings for the days of storms or a form of financial insurance.
You would not want to negotiate an insurance policy for money and no longer be insured! And so you should not change your gold into silver as long as the situation permits
Monetary gold is a good way to ensure the preservation of heritage and to transmit wealth from one generation to another. Once you have a few gold bars in your portfolio, then other investments like gold coins or gold mining stocks, gold investment fund investments and other more speculative gold investments may be considered.
2. Investing in Modern gold coins and bullion
Modern investment coins allow investors to own investment gold through legal tender gold coins and a small premium over the spot price over the amount of gold on the stairs.
The value of coins and gold bars is determined almost exclusively by the spot price of gold and fixing of gold, and therefore the gold bar follows the international price.
Gold is all available in the form of investment coins, minted in the United Kingdom, the United States, Canada, South Africa, Austria, Australia, China, and other countries. Most investment coins are minted in 1/10 ounce, 1/4 ounce, 1/2 ounce and 1-ounce form (and some coins can be purchased in 2 ounces, 10 ounces, and 1 kilo).
However, buying gold bullion of larger volume than the coins may prove to be more economical because of the lower and lower manufacturing costs depending on their high weight and lower premiums. From the 250-gram gold bar, the manufacturing costs become low, the format of the gold bar of 1000 gr or 1 kilo being one of the most common.
The format of 12,500 gr or 400 ounces is appreciated by central banks and sometimes by large investors but unusual because less practical and above all very heavy to handle
Buying investment gold in gold bars and gold coins for investment are free of stamp duty and taxes because it is not subject to VAT in Belgium and the EU due to the EU Gold 2000 directive.
3. Investing in Old, semi-numismatic and numismatic gold coins
By old or non-modern coins, we mean gold coins that are no longer struck today like the 20 Fr Napoleon, the 20 Fr Marianas, the English Sovereigns, the 10 Dutch Guldens or the gold coins of 20 Deutsche Mark. Despite their ancient characters, these coins mostly make their value in gold with just a trading margin of sale and purchase. You should know that these coins have been struck many copies and sometimes by the millions and are therefore still very common.
Some of these coins sometimes have more numismatic qualities. They are rarer and are purchased not only for their precious metal content, but also for their rarity and their aesthetic and historical appeal, or even for an extraordinary state of conservation or even exceptional. Their characteristics are put to good use with the price of gold, which means that the price of these coins will generally increase faster than the price of gold in a bull market and will decrease all the more when gold is in a bear market.
The 20 USD Liberty and Saint Gaudens coins are completely in these characteristics because even rather common they can sometimes make a premium of more than 5 to 10% more compared to gold. Some workshop cities like Denver or Carlson city can sometimes make even better bonuses and some pieces have made historic records in public sales. But this premium is mainly due to the mentality of the market in the United States and has merchants and investment funds with very good cash.
Top Gold coin sellers worldwide
4. Investing in Gold certificates
The Perth Mint certificate program is the only government-supported precious metal certificate program in the world. It allows you to own investment gold stored in the vaults of the Perth Mint (Perth MINT) in Western Australia.
Gold is therefore stored by and in the Australian government’s monetary workshop and insured by Lloyds of London
That said, this is “unallocated gold”. This means that you do not have real gold, you have a promise of the “Perth Mint” currency that it will give you your gold if you wish. (With “allocated gold”, you are the legal owner of the gold, and the account provider is the custodian.)
There are no shipping, insurance, holding or custody fees and therefore it is one of the most economical ways for investors to hold gold bullion over the long term.
Most investors choose to hold their bullion in unallocated accounts because there are no insurance or holding fees, and there is the flexibility of being able to transfer to an assigned gold account. simply by paying small manufacturing costs if the investor deems it necessary.
5 Investing in paper gold
Another approach is to invest in companies that either mine gold or explore new gold deposits. Some companies are miners and explorers
If you are going to invest in mining companies, it is a good idea to diversify your investments in several companies. Investing in a gold mine is riskier than investing in gold itself
You can also invest in gold via financial products such as options, futures, investment funds or simply in a trading account.
With all these products, you are betting on future movements in the price of gold. You have no gold, and you have no right to take possession of the gold.
All these products give you the opportunity to have a “leverage” effect on your investment. In other words, you can invest only part of your money to increase the size of your investment. This will increase your profits if the price of gold goes in the right direction, but it can also increase your losses if things go wrong. You could end up losing all of your initial investment, or potentially more than your initial investment. But also you can bet on the fall in the price of gold, which is not possible by buying physical gold. On a Trading account, you must be vigilant because the higher your position is with high leverage, the higher your risk, and your speculation. It is considered risky to play with leverage greater than 1 to 5 or 1 to 10. For example, with leverage from 1 to 5, you put 20% of the funds as collateral to play on 100% and if gold went up 10%, you would have 110% and your bet from 20% to 30%. Gold would have to drop more than 20% for you to completely lose your bet.
6. Investing in digital gold currency or e-gold
Digital gold money (DGC) – “gold-grams” or “e-gold” – are also becoming more and more popular. There are no specific financial regulations governing suppliers to the DGC so that they operate in self-regulation. GCR providers are not banks and therefore do not have to comply with banking regulations, and there are concerns that it would have unscrupulous operators operating in this emerging sector.
Digital gold is mainly used by customers to buy gold to save or as an investment and/or as electronic money between users
7. Investing in Allocated accounts
These accounts allow an investor to buy gold coins and bars from an ingot brokerage that will transfer or ship the ingots to an individual’s account in a deposit or bank. Allocated accounts involve specific gold ownership and the owner has title to individual coins or bars. Due diligence needs to be done on the account providers awarded gold and the provider’s history, security, credit rating, and net worth are of vital importance.
Two respected suppliers are Bullion Vault and Gold Money. They offer allocated accounts where gold can be instantly bought or sold. Each gold bar is checked and accounted for and is considered a safe way to own bullion.
8. Investing in Gold exchange-traded funds (ETFs)
These are funds that follow the price of gold
Two of the most popular are the Gold Street tracks (NYSE: GLD) and in London, an ETF Securities Gold Bullions Securities (LSE: ABG). They can be purchased through stockbrokers
There is normally an annual administration fee of between 0.4% and 0.5%
Who sets Gold Prices?
Gold is dictated by trading in the London OTC spot gold market and trading in COMEX gold futures, and that the “international gold price” is determined by the combination of London OTC gold prices and COMEX gold futures prices
As a rule, the higher the trading volume and liquidity in the market of an asset, the more this market affects the pricing of this asset. The global gold market is no exception. Most of the world’s gold trade falls on the London OTC market and New York trading floors: