Investing In Gold (Guide)

First, you can invest in gold. But keep this in mind, gold is a commodity — so if you are investing in gold, be aware that your protection against a price drop, your moat, is based on scarcity. Gold is a dense, soft, shiny, malleable, and ductile metal. The english word gold comes from the words gulb and ghel referring also to the color. It is the only metal of this color. 

The gold's characteristic yellow color is due to the arrangement of its electrons. When alloyed with other metals like silver and copper it has different colors, according to the percentages of the alloy.

Why Is Gold So Valuable?

Gold, like no other metal, has a fascinating history and a special place in the world. For thousands of years it has been used as an ornament of kings, a currency and standard for global currencies, in competitions as symbol of victory and more recently, in a wide range of electronic devices and medical applications. 

Ancient civilizations used gold for the decoration of tombs and temples. In modern days FMI and WB suggested the use of gold as monetary reference, i.e., the value of a bill guarantees a given amount of gold. In sports the winner gets a gold medal. The mentioned characteristics are enough to make a very useful and desired metal; thus, a very valuable one. 

Besides, it is important to consider that gold is rather scarce. It is estimated that the whole gold of the planet equals a total of 168,180 tonnes or 5,407,112,558 ounces. Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives.

The gold market is subject to speculation and volatility as are other markets. Compared to other precious metals used for investment, gold has the most effective safe haven and hedging properties across a number of countries.

Since ancient times, when you purchase Precious Metals, you are buying an asset valued. Recognized viscerally by humans, Gold always has been and always will be a viable investment and commodity. But why? What makes Gold a good investment now? Why is buying physical Gold a good idea today? 

Let’s examine what makes buying physical Gold an excellent investment and collecting opportunity. Gold has not only been used throughout history as money but also as a relative standard for currency equivalents. Many European countries implemented gold standards in the latter part of the 19th century until these were temporarily suspended in the financial crises involving World War I.

After World War II, the Bretton Woods system pegged the United States dollar to gold at a rate of US$35 per troy ounce. The system existed until the 1971 Nixon Shock, when the US unilaterally suspended the direct convertibility of the United States dollar to gold and made the transition to a fiat currency system. The last major currency to be divorced from gold was the Swiss Franc in 2000.

Furthermore, gold is traded continuously throughout the world based on the intra-day spot price, derived from over-the-counter gold-trading markets around the world (code "XAU").

Central banks and the International Monetary Fund play an important role in the gold price. At the end of 2004, central banks and official organizations held 19% of all above-ground gold as official gold reserves. It is generally accepted that the price of gold is closely related to interest rates. As interest rates rise, the general tendency is for the gold price, which earns no interest, to fall, and vice versa.

As a result, the gold price can be closely correlated to central banks via their monetary policy decisions on interest rates. For example, if market signals indicate the possibility of prolonged inflation, central banks may decide to raise interest rates, which could reduce the price of gold. But this does not always happen: after the European Central 

Bank raised its interest rate slightly on April 7, 2011, for the first time since 2008, the price of gold drove higher, and hit a new high one day later. Similarly, in August 2011 when interest rates in India were at their highest in two years, the gold prices peaked as well.

The price of gold can also be influenced by a number of macroeconomic variables. Such variables include the price of oil, the use of quantitative easing, currency exchange rate movements and returns on equity markets.The most traditional way of investing in gold is by buying bullion gold bars. In some countries, like Canada, Austria, Liechtenstein and Switzerland, these can easily be bought or sold at the major banks. 

Alternatively, there are bullion dealers that provide the same service. Bars are available in various sizes. For example, in Europe, Good Delivery bars are approximately 400 troy ounces (12 kg). 1 kilogram (32 ozt) are also popular, although many other weights exist, such as the 10oz, 1oz, 10 g, 100 g, 1 kg, 1 Tael, and 1 Tola.

Bars generally carry lower price premiums than gold bullion coins. However larger bars carry an increased risk of forgery due to their less stringent parameters for appearance. While bullion coins can be easily weighed and measured against known values to confirm their veracity, most bars cannot, and gold buyers often have bars re-assayed. 

Larger bars also have a greater volume in which to create a partial forgery using a tungsten-filled cavity, which may not be revealed by an assay. Tungsten is ideal for this purpose because it is much less expensive than gold, but has the same density (19.3 g/cm³).

Good delivery bars that are held within the London bullion market (LBMA) system each have a verifiable chain of custody, beginning with the refiner and assayer, and continuing through storage in LBMA recognized vaults. Bars within the LBMA system can be bought and sold easily. 

If a bar is removed from the vaults and stored outside of the chain of integrity, for example stored at home or in a private vault, it will have to be re-assayed before it can be returned to the LBMA chain. This process is described under the LBMA's "Good Delivery Rules".
The LBMA "traceable chain of custody" includes refiners as well as vaults. 

Both have to meet their strict guidelines. Bullion products from these trusted refiners are traded at face value by LBMA members without assay testing. By buying bullion from an LBMA member dealer and storing it in an LBMA recognized vault, customers avoid the need of re-assaying or the inconvenience in time and expense it would cost. 

However this is not 100% sure, for example, Venezuela moved its gold because of the political risk for them, and as the past shows, even in countries considered as democratic and stable, for example in the USA in the 1930s gold was seized by the government and legal moving was banned.

Gold coins are a common way of owning gold. Bullion coins are priced according to their fine weight, plus a small premium based on supply and demand (as opposed to numismatic gold coins, which are priced mainly by supply and demand based on rarity and condition).

The sizes of bullion coins range from one-tenth of an ounce to two ounces, with the one-ounce size being most popular and readily available. Gold, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. A unique feature of gold is that it has no default risk.

As there is a finite amount of Gold in the world, Gold’s relative purchasing power tends to remain stable during periods of inflation. Physical Gold adds security to your investment portfolio. For example, in 1985, the cost of an ounce of Gold was about the cost of a nice men’s suit. Allowing for some peaks and valleys in the market, today, one ounce of Gold still costs about the same as a nice men’s suit, even though the price in dollars has nearly quadrupled. 

Gold prices do fluctuate, but they generally move independent of the stock market. For a stable investment independent of stocks and bonds that can protect your purchasing power long term, buy physical Gold. As already mentioned, the market for Precious Metals generally moves independent from stocks and bonds. 

If you buy physical Gold, you can balance your portfolio so you need not fear the NYSE. In an economic slowdown, your Precious Metals may provide a comforting, stable point among your investments. You can easily look up historical Gold prices to see this balance for yourself.

Additionally, Gold is recognized over the world as carrying intrinsic value. If you wish to sell or trade your Gold in the future, you know there will always be a market for it. similarly, if you wish to endow your loved ones with a tangible inheritance, you know that Gold will only be more valuable in another lifetime. You might buy physical Gold for any or all of these reasons.

Now that you understand why buying Gold is a good use of your investment dollar, you may need guidance regarding how to buy physical Gold. Luckily, buying physical Gold is simple. If you choose an established, well-regarded Precious Metals company, you can buy with confidence. 

Buying physical Gold should be an enjoyable part of your investment journey. A common first purchase is the Gold American Eagle, one of the most popular Gold bullion items with investors.

Why Buy Silver Too?

Silver was the first metal used as currency more than 4,000 years ago, when Silver ingots were used in trading. Just like Gold, when you purchase Silver, you are buying an asset valued. Recognized innately by humans as valuable, Silver has always been a viable investment and commodity.

But what makes Silver a good investment now? Why is buying physical Silver a good idea today? Let’s examine what makes buying physical Silver a great investment and collecting opportunity. As there is a finite amount of Silver in the world, Silver’s relative purchasing power tends to remain stable. 

For example, in 1985, the cost of an ounce of Silver would just about buy two movie tickets. Allowing for some peaks and valleys in the market, today, one ounce of Silver costs slightly less than a pair of movie tickets while the price in dollars has tripled. Silver prices do fluctuate, but they generally move independent of the stock market. 

If you want a stable investment that can protect your purchasing power long term, consider buying Physical Silver. Similar to the function of Gold in an investment portfolio, Silver can provide balance to your investments. Because Silver prices move independent of stocks and bonds, physical Silver may be the stable element your portfolio needs in the event of a downturn.

If you consider selling or trading your Silver anywhere, at any time, you know there will always be a market for it because, just like Gold, silver is also recognized and has intrinsic value.