Gold Investing For Better ROI
Gold has stood as a symbol of security, prosperity, and wealth for centuries. It was considered a universal currency by several civilizations in the past. Despite gold not being a primary currency, it is still a dependable, long-term investment option. Gold was used as the world reserve currency until a while ago. Through the years, gold has proven time and again that it’s an asset that is valuable to investors.
Looking Back At The History Of Gold
If we have to understand the value of gold, we need to take a look back at how it all began. Gold was first discovered in 3000 B.C. by the Egyptians, and it was mostly used for making jewelry. One reason they used gold was that it was a noble metal, which meant it did not react with the skin. Also, because it is malleable, it could be easily formed into various intricate shapes.
Growing trade meant merchants needed a standardized method to transfer wealth. The rarity of gold along with fact that it corrodes much less than other metals, led to it being used as currency in the year 560 B.C. Gold coins that were used for trade also had seals stamped on them, which indicated where they were made. Using gold as a currency would eventually be picked up by people in Europe, the Americas, Asia, and Africa. This makes gold one of the first-ever global currencies created.
During the 19th and early 20th century, the international gold standard was adopted worldwide. This was a financial system where a country’s currency (paper money) has a specific value that is directly proportional to the amount of gold it had in a national central bank. Although this system was abandoned, several countries still hold significant gold reserves. The United States, for example, holds the largest gold reserves with over eight thousand tons.
Gold Demand Today
The industry with the most requirements for gold is jewelry – it accounts for over 50% of total demand. Coming in at a close second is direct physical investment through gold, which accounts for another 40%. These investments include the creation of coins, gold bars, and bullion. Bullion comes stamped with the amount and purity of the gold it contains. It’s different from other coins and collectibles which are based on rarity rather than just the amount of gold it contains.
Central banks, ETFs (exchange-traded funds), and individuals consider gold as a safe haven investment. Let’s say, paper money were to lose value someday. Investors would have something of value as a backup. This is also one of the reasons why gold prices rise when financial markets are erratic.
Advantages Of Investing In Gold
Though gold has not been used as currency for some time now, it’s still a viable option worth investing in for several reasons.
Gold Holds Value
Historically, gold has proven itself to hold its value better than currency over a period of time. An Armani 3 piece suit might cost you about an ounce of gold today, same as a toga from ancient Greece. The strength of gold is long-term investments because it is prone to volatility during short periods.
Hedge Against Currencies (And Inflation)
Currencies are prone to losing value through inflation, and the problem with that is inflation is always rising. Gold increases in value during inflation and is a more stable and viable investment alternative to cash in those times.
Gold As A Safe Haven
With political and economic uncertainty looming, investors are turning to gold as a safe haven. Over the years, people who have held on to gold were able to protect themselves and escape the turmoil.
Liquidity Of Gold
Gold can be converted to cash easily all over the world. This property of gold to be universally traded stands unparalleled even today. Gold markets have always been active and healthy throughout the years, making it easy to buy and sell gold.
Gold For Diversification
Gold lets you diversify your investments, and it isn’t affected by inflation or declining currency values. As the adage goes, you should never put all your eggs into one basket.
Gold Is Universally Desirable
Every other aspect of investments, like treasuries, currency futures, and other forms of securities are subject to political chaos. Gold makes a great case for itself because it is relatively immune to these incidents.
Gold As A Dividend-paying Asset
Gold stocks are likely to attract growth investors than income investors. Generally, even though gold prices rise or fall, there are mining companies that are profitable even when prices are on the downswing. The advantage with gold stocks is that even smaller increases in prices of gold mean significant gains and ROI. On the other hand, owners of physical gold are not able to get the same profitability.
When Should You Invest In Gold
If you are looking to buy gold as an investment, the best time to do so would be when you are expecting inflation to rise, and subsequent fall of local currency. Your margin of profit with gold investments depends on how early you can predict these drops. Political upheavals, declining stock markets, and banks announcing to print more currency may be indicators of imminent inflation. Inflation occurs when the local currency weakens.
Keeping yourself informed about the demands of markets that consume gold is another way to predict the increase in value.
All said and done, a method that works for the typical gold investor would be a buy-and-hold passive investment strategy. Buying gold when the prices are low is an excellent strategy to follow, as the ebb and flow of the economy are cyclic. This means you should buy when the prices are low and sell when they are high.
When Is Investing In Gold A Bad Idea?
Even something that is valuable and has global acceptance as gold is not always a good investment. In general, it is a good idea to hold off investing in gold when gold prices are high. Buying gold when it is cheaper can have significant upside potential when it comes back in favor. This is the same with any asset and isn’t any different with gold.
How can you invest in gold?
There are several ways you can invest in gold effectively -
This is perhaps one of the easiest methods to acquire gold. But because of high markups and questionable resale values, this is not always the best option when looking at a long-term strategy to invest in gold.
Buying Physical Gold
Gold can be bought directly as bullion or coins. This means that you physically own quantities of gold that you can choose to sell later. While it does feel good to actually have possession of the gold that you own, there are downsides when it comes to insurance and storage.
Investing In A Gold Company
You also have the option of buying stocks from a company that produces gold. The value of the stock will be closely related to gold prices.
Gold Futures And Options
Gold futures make a convincing argument because you can trade the commodity without being required to pay the full amount immediately. However, the gold futures market can be highly volatile because of fluctuating gold prices, and so this is considered high risk-reward.
Gold ETFs give you direct exposure to the gold you own without the drawbacks of holding it. Gold is purchased on your behalf by the company. What you get is a liquid asset that invests directly into bullion and bars. The rub is that you do not have direct ownership of the gold you buy.
A simple, convenient, and secure method of investing in gold without worrying about the hassles of storing it is to buy digital gold. You can buy investment quality gold here at OneGold which is backed by actual physical gold. You can hold on to this and sell it online at prevailing gold prices, or have it delivered to your house.
Gold is definitely a good avenue to invest in for several reasons. It can help diversify your investment portfolio, and significantly reduce risks during high inflation or political turbulence. However, before you do invest in gold, take the time to figure out which investment option is right for you. Some things to consider would be how much it would cost you to store and insure physical gold.
There is no single gold investing option that is good for everyone. A bit of research will go a long way to help you figure out how exactly you should invest in gold. Careful investments can give you and your family a life filled with abundance and happiness.
How to Start Gold Investing with OneGold
With a deep understanding of precious metals that is unmatched in any competing partnership, APMEX and Sprott came together with a shared vision for the evolution of precious metals ownership. OneGold is the result of the knowledge, experience, and resources of these two globally recognized partners.
- Create a Free Account at OneGold.com
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- Fully allocated and segregated investment grade precious metals.
- Annual storage fees are Silver .30% & Gold .12%