Things to Consider Before Investing in Gold

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by Angela Jones · 4 min read
Things to Consider Before Investing in Gold
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Investing in gold requires sound knowledge and understanding of the financial markets and their trends to truly capitalize on the value it holds. The information discussed might give you a kickstart in your gold investment journey.

Gold, the glittering piece of metal, has kept people in awe and fascination for thousands of years with its unique aura and beauty. Moreover, its diverse nature has allowed people to get plenty of benefits from it, ranging from medical, fashion, industrial, financial, and other intrinsic values that come with it, like pride, status, and power. People are investing in gold to store their wealth against the fiat money in times of financial crises or economic disasters.

About 50% of the newly produced gold is used in making jewelries, with 40% in investments and the remaining 10% in industries. Gold has kept its significance in trade throughout the centuries, with its origins dating back to 600BC when they were first used in the form of coins. In the contemporary world, gold is sought for as an investment as it hedges the risks of the investors against other assets and therefore considered a haven investment.

Investing in gold is not easy. There are certain variables to consider and facts to be acknowledged before doing so. If you’re planning to invest in gold, you should keep in mind how the system works and evaluate the risks proactively before making it a part of your portfolio. If you’re interested in gold, here are the 5 things you should be aware of:

Gold Price is Correlated to the US Dollar

The price of gold is positively correlated to the US dollar as the dollar is seen as a stable currency and therefore held in foreign reserves along with gold. So, generally, a strong dollar results in higher prices of Gold. However, gold acts inversely in times of economic pitfalls when the dollar weakens, and gold demand increases because of its haven status. Therefore, central banks around the world tend to keep most of their reserves in Gold.

Know the Difference Between the Physical Gold and Gold Stocks

Investing in gold stocks means that you’re investing in a gold mining company and not buying the physical gold itself. Here, you won’t have the direct ownership of the gold and your profits will be determined by the performance of the company and the returns it generates. Gold stocks are the best option if you don’t want to own physical gold. Physical gold, on the other hand, has its own sets of benefits, which includes ownership and protection against currency fluctuations

Look Out for Gold Certificates

When you invest in gold certificates, you’re assumed to own the amount of gold specified in the certificate. Gold certificates or “paper gold” are a much safer investment than physical gold because you don’t need to worry about keeping physical gold with you and the investment process is relatively easy. However, some unethical companies issue certificates multiple times on the same gold; therefore, you need to be aware of such scams and investigate the company before buying a certificate.

Gold Bullions and Certified Gold Coins Aren’t the Same

Bullion is referred to as the metal in its purest form in shapes of bars or coins. Gold coins have been used over centuries and therefore apart from its purity, its antiquity and rareness also matter. Certified gold coins usually have high value when compared to bullions and their price is maintained or even increased when the spot gold prices fall. So, before investing, you need to be cognizant of both types of investment.

Find a Secure Place to Keep Your Gold

If you plan to buy gold in bullion or coins, try to arrange a safe, secure, strong, and reliable place to keep it. If you can’t keep it at your place, you should then go for credit unions or use a safety deposit box at your local bank. However, if you go for the latter, you’re supposed to pay a fee for using the storage facility, which will eventually bring your profits down. When you plan to redeem the value of your gold, you must consider the additional cost you’ve borne.



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Andy Watson
Author: Angela Jones

Working in the field of investing and advising people to stabilize their financial future, Angela Jones writes blogs to provide help in terms of saving. It is believed that the US is going through an economical turmoil, to protect ourselves from this we need to turn spending habits into saving habits.

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