How to Invest in Gold

Although official sources are telling the general public that the domestic as well as the world economy are recovering nicely, most investors simply are not taking the bait. QE Unlimited and the other emergency policies that are still in place despite the government’s repeated assurances that the economy is back into a positive spin tell two completely different tales to investors. Monex Live Gold Prices

The smart money is still in precious metals for 2014, especially gold. Even with the incredible gains of the metal tapering off at the end of 2013, most experts agree that gold still has a great deal of room to rise because the basic conditions of the economy which created its rise have not changed.

Investors expect QE Unlimited to end at some point in the near future, taking with it the inflated prices in the bond market as well as the short term relief that many industries felt from government assistance programs as well as running on the fumes of credit from inflated currency. They are betting that gold will serve yet again as much more than a hedge against more speculative investments or as a crutch that a retirement portfolio can stand on in hard times: They are fully expecting it to return to the realm of a growth stock that can replace the security as the go to investment to grow a portfolio.

With that in mind, the question to the investor is more of which way is the best way to profit from gold rather than if it is a good investment or not. Below are a few of the tried and true ways in which investors in the recent past have invested in gold with a great deal of success.

1 – The exchange traded fund route

The exchange traded fund, or ETF, gives an investor a way to diversify a portfolio immediately while maintaining the liquidity of a stock. In this way, the ETF combines the best characteristics of a mutual fund and a stock.

An ETF can be traded just like a stock and is often used for short term investments just as much as long term investments. There are ETFs, which hold only gold in their underwritings, as well as ETFs that hold other precious metals as well such as silver, platinum and copper.

If you are especially sure in the validity of your gold position, you can also invest in a 2X or 3X ETF which will bring the appropriate amount of multiplied gains or losses to a portfolio based on the gains or losses of the underwritten securities. Keep in mind that ETFs trade like stocks and must factor in the short term whims of the marketplace; as such, the price of the ETF may not completely accurately reflect the value of the underlying assets, especially with 2X or 3X exchange traded funds. The managers of such funds, however, are beholden to try to hold their funds as closely as possible to the appropriate metric.

ETFs are considered a derivative investment because their holdings usually consist of companies that are in the precious metals market rather than holdings in the metals themselves, although there are ETFs that hold bullion. For those investors who are looking to invest directly in a metal, however, buying bullion may be the better alternative.

– Holding gold bullion

Holding gold bullion is done through a reputable and properly certified government proxy in the private market – individuals in most countries are not allowed to legally hold bullion at their private residences. There are advantages and disadvantages to this strategy. For one, if the economy does experience a double dip recession or a complete correction, bullion stands to gain the most value as an investment. The government, however, is known to simply take the bullion of investors and devalue it for its own benefit if the economy gets too bad, which can completely wipe out the results of smart investing.

Your best bet if you want to hold gold bullion directly is to get in touch with a reputable proxy that will let you know about the plans that the government has for bullion, if any. The proxies are in touch with government officials directly and they can definitely tip you off to any movements that the government may make. If you do not want to deal with the political aspects of investing in a precious metal directly, you can make it a point to move into collectibles rather than into pure bullion.

– Collectible items

Collectible items that are made from high quality gold are considered a direct investment that can most definitely hold and build value as the precious metal itself becomes more expensive. Collectors who are well informed will choose a collection market that is highly liquid in case they want to sell; however, many collectible items can also be used in everyday practical life, increasing their value without having to serve as a direct investment. For instance, much of the staying power of the brand Rolex has been in its use both as an investment in gold as well as a practical accessory for social life.

Coins are another market that are highly liquid. No matter the activity in any other market, you can usually find a gold coin collector who is willing to take your coins off of your hands if you are willing to sell. The caveat here is that collectors who are professional are quite good at negotiating a price down to below the going market level, so expect to lose a few percentage points in the deal unless you are experienced in the art of negotiation yourself. Collection markets are much like real estate markets: It is best to buy when there is a buyer’s market going on. Professional collectors will not be so strict then.

No matter which way you choose to invest in gold, you should know that most experts expect it to be a good investment in 2014. For those who are smart enough to get ahead of the curve, the main problem will be how to cement gains rather than actually working to obtain them.

How to Invest in Gold
5 (100%) 1 vote