gold investment

How To Start Investing In Gold

The approach to defining gold might not be quite a specific one. Gold has been around for a long time; its relevance across different periods has been everly changing.

This is to say that what gold meant yesterday might not be the same as today. However, for sure, gold has long been held to be valuable regardless of the period.

This piece of metal is highly versatile, making it usable in various industries, from jewelry to stock and from stock to finance.

The place of gold is one that stands out. The effect of its multiple usages is that it makes it even more challenging to find an encompassing definition for it. It is only reasonable to hold the meaning of gold to be relative.

What is Gold? An Investment, A Currency, or A Piece Of Jewelry?

The way gold is viewed by people and at different times is unique to them. As such, the material is defined uniquely by people – mostly based on its value to each individual.

In Science, gold is one of the many chemical elements of the periodic table. It is called Aurum in Latin, hence its scientific symbol AU.

It is held as a metallic element because of its properties. Ductility, malleability, lustrous shine, and conductivity are among its properties. All are characteristics exhibited by metals of the periodic table.

Hence it takes its place on the periodic table as a high mass metal. It is described to be a bright yellow metal in its pure state with high luster.

Don’t worry. I have no intention of boring you out with science, so let’s move on.

In jewelry, gold is a highly-priced lustrous material used to make all sought of adornment. Gold has been used for years to decorate pretty much everything, including ourselves. These metals have been used to show class and Elegance across many centuries.

The standard unit of measurements of gold is Karat, with 24 karats being the purest form.

Gold is also used as money. In the early years up until a considerable part of the later generations, gold was used as money. Gold in finance then was the money spent.

Because of its malleability, gold was easily crafted into coins. The idea then was that gold was precious and delicate to mine, it should be made a medium of exchange, and it sure was used for a long time as money.

Why is Gold Valuable?

Gold has been held to be precious metal for a long time. As described earlier, it has a luster shine that makes it very attractive; this makes it perfect for beautification. However, it was also challenging to mine from the ground; thus, it was held to be very valuable.

It was used to accumulate and store wealth as assets. Subsequently, this shiny metal was used as a medium of exchange during a trade.

Even today, gold is used as money, although not as the fiat type money is used, it is also used as a medium of exchange.

What Industries Have The Highest Demand for Gold?

The jewelry industries alone use about 50% of the gold available in the market. Why so? With the Advent of the fiat currencies mainly in use today, the use of gold for monetary exchange has been relegated to money-in-store, making its second use (jewelry making) the more prevalent use.

Gold is also used for solid investment; gold is used in crafting medals, bullion, trophies, and many more items. Gold is used as physical assets mostly by central banks and personal investors. This industry is the second largest user of gold globally, being only second to the jewelry making industry.

For the physical investors, the gold is a “safe haven” in that: were paper money to become worthless today, the world would have to fall to valuable materials like gold.

As a result, it is common to see investors up the price of gold when they sense a vulnerability in the paper currencies.

Because gold is a metal, it can conduct electricity; this makes it perfect for making specific gadgets. It can be used to create customized devices to match the class or social status of people.

How is Gold Obtained?

Like many other mineral resources, gold is mined from the ground. It is usually obtained along with other metals like silver and copper. This means pure gold mines are rare. The effect of this is that gold has to undergo further processing to isolate them as their pure metals.

To mine gold, a mining company would first have to find a potential gold-rich land. They notify the relevant government agencies of their intentions to mine, requesting a permit to carry out the mining.

If all criteria are met, and the governmental agencies find the companies fit by all standards, a license is granted. The license is a “go ahead,” and mining follows suit.

The mining process is a capital and labor-intensive process. Mining has for long been known to be a dangerous occupation. Well, there is no treasure hunt without a bit of perilous adventure. After the mining process, further purification is done to isolate gold from its mixture.

This gold is then ready to be sold in the market at a well-matched price compared to the risk and labor put into its mining.

How Much Gold is Available to Us?

According to Wikipedia, the total amount of gold mined in 2019 was put at 190,040 metric tons. This shows that there is still a considerable amount of gold in the natural reserve.

Finding exact values for the amount of gold ever mined or the amount of gold available on earth might be farfetched. However, it is possible to get a rough speculative figure of how much top ground gold (already mined gold) exists.

Experts put the value of Total top ground gold to be 2.5 million metric tons. See here for more info. This is to say if we were to put out all our gold in assets, all the golds in each country’s’ reserve, and all other forms of gold, we could find above the earth, the amount would be the said figure (2.5 million metric tons).

Although, experts admit that this value is only a speculation based on professional insight. We can accept this value as a rough estimate for analytical purposes.

Five Ways to Start Investing in Gold

1. Gold Mining Stock Investment

Investing in gold mining stock produces returns in a way owning physical gold does not. Investors mostly turn to mine gold stock to invest as they are relatively safer and are considerably more profitable.

What happens here is that investors opt to invest in mining stock, making profits from the mining companies’ as returns. This sounds like a reasonable business, and it very much is.

However, the problem with this form of investment is the risk involved in the mining operation. Miners might meet with accidents; there may be a collapse in infrastructure, or miners might decide to go on strike. Meaning to say, even this mode of investment has its downsides.

2. Invest in Pieces of Jewelry

Jewelry has, for long, been an excellent way to invest in gold. They are easy to acquire and even easier to sell. Buying jewelry is a good way to store gold as an asset.

While other gold-based investments might involve stocking gold in a non-usable manner, investing in jewelry is a win-win. You get to store your gold in assets while the gold remains usable as an adornment.

However, the downside to investing in jewelry is the possibility of high market ups and the chance of misplacing or being robbed of this priced piece. If not properly kept or saved. Storing costly jewelry in a bank is an excellent way to safeguard them.

3. Bullion Bars

This involves owning physical gold mostly in the form of collectible coins and bullions. Bullions are gold pieces with their market value printed on them.

The major investors here are banks and private investors. However, the downside to physical investment is the need for storage and the difficulty of liquidating the assets.

TIP! At Silver Gold Bull you can buy gold ingots, gold bars and gold bullion. They’re the United States’ leading bullion dealer.

4. Acquire Gold Certificates

This is a certificate issued to an investor by a gold owning company. The deal here is that the certificates are issued to the investors to represent unallocated gold owned by the company.

In effect, no specific gold is represented by the certificate, but the company is believed to have enough gold to back all issued certificates. The cons of this investment are that only a few companies issue this certificate, and assets are also illiquid.

5. Buy a Gold Future

Future contracts involve trading on set standard exchanges. It involves an investor buying or selling gold at a specified time in the future at the set price of gold at the said time.

To deal with a Future Contract, an investor would need to open a brokerage account next to this. The investor deposits an initial margin; this is the minimum amount obtainable to start up a future contract.

The future gold market is dynamic. This means the market might flow in your favor one time, affording you profit and might cost you loss some other time.

If, however, your account drops below the minimum start-up (initial margin), you would be required to fund the account to balance the initial margin.

This is to keep the investment going. At each point in time, you need to maintain the initial margin, which is relatively smaller than the value for the entire contract. When the contract expires, it is usually settled in cash.

The downside to this investment includes high leverage and time limitation to the contract. The merits, however, include the need for only relatively small start-up capital to control large amounts of gold and high liquidity.

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Mining Focused ETF

If you do not like to trade in future gold contracts, then perhaps you would like the mining-focused exchange-traded fund (ETF).

This allows you access to multiple gold miners. Most mining-focused ETFs like VanEcK Vectors Gold miners ETF and VanEcK Vectors Junior Gold miners ETF also deal in other metals.

While the future contract investment involves you monitoring the initial margin, investing in an ETF only requires that you open an account, pick a broker, and a suitable ETF.

The pros of this investment include direct exposure and high liquidity. The downside to it, however, is there are no upsides asides gold price changes.

Mutual Funds

This is a much simpler way to invest in gold. This form of investment saves you the extra effort of needing to find a suitable mining option as it provides you with various mining stocks while having a single investment.

Conclusion

Gold has always been an excellent way to invest, store money in assets, and trade. Although the modalities of its usage have changed with changing times, gold remains valuable in finance.

You might be doing yourself a whole lot of good by investing in gold today. This article gives you an overview of what the market looks like highlighting the various ways you can invest in gold, stating the pros and cons of each modality.

If you are looking to invest in gold, we hope this article is able to help you narrow your option and provide you with the best form of investment that works for you.

The ETF is one of the best ways to invest in gold today. It requires less maintenance than the future contracts as you do not have to keep monitoring your initial margin. It is safer than investing in jewelry as you do not have to worry much about safeguarding them, and it is highly liquid as compared to investing in gold certificates.

While what might be the best way to invest in gold remains relative to you and your needs, I recommend you trade by ETF as a safer investment with good returns.

TIP! Algorithmic trading is very popular among traders. And in this course, Petko Aleksandrov, a professional trader with over 10 years of experience, will share with you his Top 5 Gold trading strategies.

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Please note that under no circumstances should any information from this blog be used as replacement for professional financial advice.

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