The Basics of Investing in Gold
Investing in gold is an increasingly attractive way to protect your wealth and experience some steady gains too. Thanks to high prices in recent years, gold is enjoying great attention from investing gurus and newcomers alike.
Due to its somewhat unconventional stance as a commodity, though, many don’t realize what it takes to invest properly. Before you put your cash into this precious metal, here’s what you should know about the basics of investing in gold.
Advantages of Gold Investments
Gold is a commodity, just like silver, oil, sugar, and coffee. Commodities are tangible assets with real value in everyday life, and gold’s exceptional history as both a currency and a resource for industrial and consumer uses provides its value. Due to its lengthy and special commodity status, gold enjoys advantages that other assets, like stocks and bonds, do not.
Hedging against inflation is a potent advantage offered by gold. Gold always keeps pace with inflation, and often outpaces it in growth. This is far better than leaving cash sitting in bank accounts or Money Markets, where interest rates may not even match inflation.
The metal also offers stability and protection from threats to other investments. Gold may rise and fall in value, but it rarely shows the volatility of stocks. It’s a great alternative to bonds, which are increasingly under pressure due to national debt problems.
You should buy gold with the intention of holding it as a long term investment. It’s not a good choice if you’re looking for quick profits. Over a decade or more, you can expect to see steady returns as gold prices climb.
Gold prices change on a daily basis in response to three main factors: scarcity, demand, and inflation. Like any resource, gold is subject to rise or fall when its supply increases or decreases. New mines, new uses for gold, and consumer demand strongly influence these developments.
Still, the base price of gold will always rise in response to inflation. Natural economic growth and monetary policies issued by banks cause their currencies to grow less valuable over time.
This means that gold prices are set to rise along with other commodities, not only because the gold is growing more valuable, but because the US dollar, Euro, and other currency units worldwide are weakening.
How to Buy Gold
There are two popular ways to keep gold. Buying physical bullion allows you to hold it as bars or coins. Older gold coins lend the prospect of extra collectable or antique value too. The other way to get gold is by purchasing Exchange Traded Funds that invest your cash in gold related assets.
Shares of mining stock, bullion certificates, and other instruments are common. These investments are more liquid than physical gold, since they can be instantly bought and sold, rather than having to locate a buyer.
Many find investing in gold to be highly rewarding and simpler than it initially appears. By understanding how gold works, you can confidently begin placing your cash in the investment vehicles of your choice, and watch the rewards materialize.
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