Gold is a valuable and rare metal prized by civilisations since ancient times. It’s used in jewellery, coins, currency, and various industries. It can also act as an investment hedge against inflation, market volatility, and currency devaluation as it maintains its value even when other investments decline.
Profiting From Various Gold Investments
Investments in gold may include buying physical gold, exchange-traded funds (ETFs), or futures contracts. Each kind offers advantages for investors.
1. Physical Gold
When people think of investing in gold, they often picture buying physical gold such as coins, jewellery, or bullion (gold bars).
- Gold Bars
Gold bars are a good investment as they’re generally 99.9% or 999.9% pure gold. However, this may be a downside as they can be costly too. An ounce of gold costs more than USD$1,700 as of this writing. As they’re also in bars, they’re indivisible and may be impossible to sell in small parts.
And they may be stolen, which means they require a space to be stored in. If you’re wondering about the best way to keep your gold bars safe, the good news is there are many ways to store your precious metals.
On the bright side, the best way to profit from them is to sell them for a higher price at the right time. Hence, it’s essential to be aware of the fluctuations in gold prices, global financial markets, and the political and economic climate. As gold is dollar-denominated, it tends to rise with inflation, which means it can be very profitable over time.
- Gold Coins
Gold coins are small, round gold minted by nations or private companies and stamped with their manufacturer’s mark. American Eagles, Australian Kangaroos, and Austrian Philharmonics are some common gold coins.
Many believe that they’re more liquid than gold bars as they can be sold in small increments too. Additionally, they tend to hold their value better than other forms of physical gold since they have a numismatic (collectible) value. This means that a gold coin may be worth more than its gold content due to its popularity and rarity.
Thus, researching a gold coin before investing in it maybe a worthwhile thing to maximize profits.
- Gold Jewellery
Gold jewellery are rings, necklaces, bracelets, and earrings made from gold. You’ll usually find them in stores in 14-karat, although some are made from pure 24-karat gold.
As an investment, gold jewellery may not be worth its full retail price when it’s time to resell. Therefore, choosing pieces that hold their value over time is vital. It’s also noteworthy to choose those that have great craftsmanship. Lastly, buying from reputable jewellery stores will help ensure that the gold jewellery you purchase is authentic.
Investing in these three forms of physical gold comes with various tax rules. Thus, learning about these rules can also help you to make the most profits out of them.
2. Gold Exchange-Traded Funds (ETFs)
Gold ETFs are another popular gold investment. They provide diversification and liquidity as they can be bought and sold like stocks. Nonetheless, they still come with certain risks, such as counterparty risk, management fees, and market volatility.
To make the most out of your gold ETFs, there are many tips to consider. Some of them are listed below.
- Research the fund’s management team and track record;
- Monitor the performance of gold prices periodically;
- Understand the tax implications of investing in gold ETFs;
- Set reasonable expectations for your return on investment; and
- Consider investing in multiple gold ETFs for diversification.
If you still have doubts if it’s safe to invest in gold whether in its physical or dematerialised form, read this article on why you should.
3. Futures Contract
A futures contract is a legal agreement between two parties to buy or sell an asset at a fixed price in the future. This gold investment is prevalent among traders and investors because it offers the potential for profits regardless of market conditions.
When investing in gold futures, here are some steps you can follow:
- Ask financial advisors and research the market.
- Ensure that you’re familiar with the rules and regulations of the futures exchange you’re trading on.
- Set realistic expectations for your investment.
- Invest in gold futures with money you can afford to lose.
No matter which form of gold investing you choose, it’s essential to do your research and consult with an expert before making any decisions. Gold investments are affected by various factors and by understanding them, you can make informed decisions and maximise your returns.