7 min read

What You Need to Know Before Investing in Gold


Alicea James
Professional Writer and Editor
Contributor
gold bar
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With the way the economy has fluctuated over the years, it’s no surprise that so many people are searching for new and innovative ways to invest their hard earned money. An investment is anything that can be purchased with money and in the long term is expected to yield some kind of profit, or even produce income. That there are definitely pros and cons no matter the type of investment you choose; in this instance we’ll be looking at gold as an investment —and yes, it does have its share of pros and cons. However, for many people who have chosen this option it has certainly been worth it.  Gold is a durable metal and its value is always strong and has preserved wealth through thousands of generations—paper currencies have not been able to accomplish this feat as pointed out by Investopedia.

Despite the benefits, however, keep in mind that while gold is certainly a great investment option, the price tends to fluctuate, therefore, you don’t have any guarantee that the price will increase or maintain its value at the time you may choose to cash out.

Types of Gold

Before investing in gold, there are quite a few things to consider. You need to figure out how much you want to buy, how much it will cost, the necessary paperwork needed to complete this type of transaction, and even where to buy it.  However, before we even get to all that, let’s look at some gold options that are available to you so that you can narrow down your selections. The task of picking the one that best suits your needs can be quite overwhelming, but it’s only daunting because you are stepping into new territory. It’s really not as complicated as it may seem once you understand the basics.

Coins

Many retired professionals and collectors seem to prefer this option. As the name suggests, these are coins made either entirely, or mostly of gold. It is suggested that you stick to 1-ounce gold coins and avoid rare gold coins as they require a certain amount of expertise and might make things a bit more complicated. Not being able to tell the difference between a certain grade of coins can lead to you losing thousands of dollars. So, if you’re not an expert in this area stick to the aforementioned tips.

Stocks

This is considered to be one of the best gold investment options for those who want to capitalize on the rising cost of the physical one.  Gold stocks often encompass the production, exploration and mining of gold. With this option you don’t have the hassle of figuring out where to store it since you won’t be in possession of any physical items.

Bullions

To put it simply, this is gold in bulk form and it is sold in several countries including India, Switzerland, China, France and the UK—just to name a few. There are certain countries that offer special benefits such as tax advantages, so, careful research is required before deciding where to purchase. Keep in mind that storage is another option you will need to consider if you opt for this route.

Jewelry

This is by far one of the most popular ways to own gold, and many newlyweds tend to gravitate towards this (wedding bands, engagement rings). The World Gold Council purports that gold jewelry accounts for almost half of the demand. Truth is, owning jewelry also allows you to benefit from the ‘Cash for Gold’ industry especially in situations where you might need quick cash and you don’t want to take out a loan. This is probably the most appealing aspect of choosing this type of investment. In order to benefit from this you need to buy your jewelry from a reputable dealer to ensure that you are getting the purest metal possible, so that if, and when it’s time to sell you will get value for your investment.

Mutual Funds

With this option you are not directly investing in gold but actually purchasing stocks in companies that either mine or produce these precious metals. There seems to be great benefits to this option as Jago Investor gives an example that in 2008 when the equity market crashed, “gold mutual funds were the best performers in any Mutual funds category,” clearly proving to be a worthwhile source of investment during unreliable equity markets. 

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Investing in Gold

Once you’ve reviewed all the available options you should be one step closer to narrowing down your choices. However, there are other things you now need to consider, such as:

  • How Much Gold Should You Buy? - Once you’ve decided on the type of gold you want to invest in, the next step is figuring out how much. Jim Cramer, writer for the ‘Mad Money’ segment on CNBC, suggests that only about 10% of your portfolio should consist of gold. His reasoning for this amount is that he considers it as an insurance policy against things such as inflation and geopolitical events, and thinks that “no worthwhile insurance policy should be 20 percent of the money you have invested.” Cramer may be onto something, but check with a financial advisor before making any decisions. If you are looking to invest in gold, banks such as Valartis Banks (Lichtenstein), Loyal Bank and Euro Pacific Bank provide a range of services in this area. These reputable companies will no doubt be able to explain the range of options available and guide you in the direction that most suits your needs.
  • How Much Will It Cost to Purchase Gold? - The price will differ based on the option you’ve chosen for your investment. Other things that can affect the cost are supply and demand, currency value, market speculation and even current events. Due to these factors the price for gold can change every couple of seconds. However, Apmex purports that in the past 5 years the lowest price for gold was a ‘spot price’ of $1,057.10 USD per troy ounce, while the highest price was $1,905.10 USD. ‘Spot price’ refers to the base price of the product without markup. You should note that those who sell gold always sell it higher than its actual value which is why it’s important to conduct thorough research before purchase. 
  • Paperwork Needed to Acquire Gold- The process isn’t very complicated unless you are purchasing specialty bullion types to include Canadian Maple leafs, Mexican Gold Onzas and South African Krugerrands in quantities of over 25 ounces. If you are unsure about other aspects of these types of transactions it’s always best to consult a legal representative just to be on the safe side.
  • Where Can I Buy Gold? – There are many different places to buy gold, but I would suggest that you hire a reputable dealer to guide you on the best course of action. Often times your bank will be able to offer suggestions and you should take due diligence and do some background check to ensure that you are using a knowledgeable and reputable dealer. You have the option of purchasing your gold online, and oftentimes the product is shipped within 24 hours. One good advantage of the online method is that it can be done at a time of your convenience, and if you find a great market price you are able to lock that in immediately. Depending on your location, you will also be able to find local shops that sell gold— although they can sometimes be more costly than online dealers.  Something else to consider is ease of transaction, especially as it relates to payment options. These days there is PayPal, bank transfers, credit and debit card payments, check, money order and cash. Make sure you find out if the dealer is able to accept your mode of payment as it will make things much more convenient for you.

Storing Your Gold

Whether it’s gold jewelry, bullions or coins you will need to figure out a storage plan. Somewhere that is safe and secure, and that you can access at your convenience.  You can store them in a safety deposit box at your bank if you so desire, the only downside to this is you are restricted by bank opening hours, so you won’t have access to them outside of business hours. Therefore any business transactions during the weekend or before and after business hours will be affected.  Another option is a depository (private firm) which works best for persons with large investment holdings. Keep in mind that this alternative requires a storage fee, but it does allow investors to spread out their holdings throughout a range of countries —giving you the advantage of geographical diversification as pointed out by www.cnbc.com.

If you prefer the ‘old school’ like many others, you can even chose to store their gold at home in a safe.  The advantage is that you have access to your precious metal 24/7. This option, of course, does come with its share of safety concerns as well, but there are many people who have been storing their gold at home for years without any negative ramifications; the key is secrecy.  

You will need to weigh your list of options and figure out which ones work best as they all seem to have their share of advantages and disadvantages.

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Alicea James Professional Writer and Editor
Alicea James is a lover of books, fashion, entertainment and music. Her professional career started in writing and has since expanded as she continues to discover new occupational challenges.She currently serves as Editor and Contributing Writer for Caribbean Wellness and Lifestyle Magazine, and Ido Jamaica Magazine. She is also a Lifestyle Writer for Dallasblack.com. Favourite Quote: When the power of lover overcomes the love of power, then we’ll know peace- Desmond Tutu.
Alicea James is a lover of books, fashion, entertainment and music. Her professional career started in writing and has since expanded as she continues to discover new occupational challenges.She currently serves as Editor and Contributing Writer for Caribbean Wellness and Lifestyle Magazine, and Ido Jamaica Magazine. She is also a Lifestyle Writer for Dallasblack.com. Favourite Quote: When the power of lover overcomes the love of power, then we’ll know peace- Desmond Tutu.

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