Many investors have recognized the value of gold, which is why this shiny and beautiful metal is still considered an asset today. In the past civilizations, this precious metal was considered a currency, and it is also used in many pieces of jewelry. Since the first people struck gold in 550 BCE, metal has been an essential foundation of the monetary system and overall operations of society.
Earlier discoveries of treasures in 4000 BCE meant that people at that time had linked the metal with considerable wealth and power. Even when so many countries moved from metal to paper currency, the “gold standard” will be meant that money is still linked to it. See more about paper currency on this site here.
What makes gold valuable is its scarcity, rarity, and malleability. It continues to fascinate many people even today, and many have found other uses for it. Technology has a massive demand for metal while also used in electric cars. In today’s digital age, people are now investing in gold as part of their financial portfolio, and here are the reasons why you should too.
About Investing in Gold
There are many reasons why so many people invest in precious metals. Some of them are to protect their wealth against recession, economic downturns, calamity, and political turmoil. They want to preserve their purchasing power as well.
For example, if you bought gold in 1990 for $383, it is now worth $1800 at the beginning of 2022. The $383 would be worth more because you have invested it in precious metals, but the cash itself will go down in value because of inflation.
Another thing is that you might want to diversify your portfolio and protect it from risks. Only a few may decide to invest in gold, silver, platinum, and palladium because they might prefer traditional stocks and bonds. However, it is always advisable to create a balanced portfolio with diverse investments to have an asset going up or retaining its value when the stocks are down.
Choosing the Right Company
Investors are trying to diversify, especially in their long-term strategies. This is where a company’s help can be valuable. The ones like Barrick gold have been in operation for decades, and it has its headquarters in Ontario. It is a mining company that extracts copper and gold from various sites, and it sells refined metals like jewelry, bullion, bars, and coins.
Know that these types of companies are not necessarily a mint, refinery, or dealership since investors are not allowed to purchase these assets from them. Instead, you might want to buy their public share of stocks. An in-depth review is available at this link https://www.kingoldjewelry.com/is-barrick-gold-a-scam-or-legit-full-review/ where you can know how these companies operate in detail. Know that risks will always accompany any investment, so it is best to do your research and understand the drawbacks before investing with them.
How to Get Started?
You have a lot of ways to add precious metals to your portfolio. Generally, gold is only available in the form of jewelry, bullion, and coins. However, with the introduction of online trading platforms and other digital products, know that you also have many options for gold-related stocks, mining companies, exchange-traded funds, futures, and more.
With the right platform, you will have access to countless products in the market and trade them for a profit. Others even include the precious metals into their individual retirement accounts or IRA to lessen their risks against sudden market downturns.
What to Buy?
Gold Options and Futures
The futures contracts often give the holder the privilege to buy specific amounts of gold at a future price and date. The options contracts will also enable the holders to sell or buy their shares of mining stocks or exchange-traded funds at a specific date and time. These contracts tend to move along with the metal’s underlying shares or price related to the equity. You can get exposure to the precious metals without necessarily owning them.
However, the downside of the options and futures is the leverage. The investors do not necessarily need to buy or sell the full value of the transaction. This leverage may increase the gains significantly, but they can also face massive losses if they are unsure of what they are doing.
Mutual Funds and Exchange-Traded Funds
Precious metals ETFs may focus on owning the shares of a mining company, but they involve a different set of risks. There are exchange-traded funds that can be more focused on the ownership of the bars, and they offer individuals exposure to the current spot prices of gold. This is where they tend to match the spot price movements for the day.
However, the exchange-traded funds usually come at a cost, and they are in the form of expense ratios. But the good news is that the prices will be worth it if you have done your research since an ETF is the easiest way for beginners to get into the precious metals industry. These assets are also highly liquid, where you can find buyers and sellers for them online at any given point.
The mutual funds and precious metal stocks are often the shares of huge mining companies and even the miners themselves. This is a diversification strategy that many investors take advantage of to have broad exposure to the mining industry. This helps them reduce risks because the mutual funds and ETFs have upsides aside from the price of gold.
Bullion, Coins, and Jewelry
Investing in coins or bullion will mean going to a dealer and buying 99.5% to 99.9% pure ingots. Bullion can be expensive, and ingots can also cost a lot, but many investors want them because of their long-term value. Jewelry is another indirect way that you can invest in precious metals. They tend to hold their value as a collector’s item, which can be handed to the next generations.
Gold coins are considered stores of value and not necessarily a country’s legal tender. There are often expenses associated with insuring, storing, and purchasing them, for which you need to be prepared.