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A Beginner’s Guide to Gold Investment

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A Beginner’s Guide to Gold Investment

Gold is regarded as a precious metal all over the world. Every culture holds it in high regard, and it has been used for various purposes.

From being used as currency to a fundamental part of manufacturing electronics to making jewelry; this precious metal has high intrinsic value.

In not too recent times, the popularity of this commodity as a great alternative to conventional means of investment has been on the increase. It is seen as an asset that is a safe haven investment and can withstand all sorts of volatility.

While it is true that the rave about gold is not just hype, it is not something that one should invest in unadvisedly.

That is why this article will discuss some basics that every new investor in this precious metal should know. You can also check out this site for advice on investment options: https://www.ruleoneinvesting.com/

Different Ways to Invest in Gold

There are different ways to invest in this precious metal and they include the following: –

  1. Purchasing the physical commodity
  2. Buying stock in gold mining companies
  3. Buying gold ETFs

Purchasing the Physical Commodity

This is the most popular means of investing in gold that a lot of people know. The physical commodity is referred to as bullion and it comprises of coins, ingots, and bars. The kind of physical gold that is considered investment grade is one that has 99.5% purity.

The bars must have the name of the manufacturer, the % of the purity and the weight inscribed on it.

The weight is typically between 1/10 troy ounce and 1 kilogram (31.1 grams is equal to one troy ounce).

Coins on the other hand come in different sizes and shapes. And the buyer may have to pay for any engraving that they want or to have the collector’s value stamped on it.

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Note that some coins can be used as legal tender in the country they originated from; an example of this is the UK gold sovereign. However, they cannot be conveniently used as currency in day-to-day transactions.

You can purchase physical commodities from brokers or banks. These brokers can either be online or offline.

However, you need to do your due diligence to ensure that the dealer you want to purchase from is a reputable one. In fact, it is best that you approach local sources than online dealers that you do not know or trust.

Another way that people invest in the physical commodity is by purchasing jewelry made of this precious metal but this in actual fact is not considered as a true investment.

This is because there are factors that affect the value and price of these jewelries apart from the intrinsic value. These include the cost of workmanship and branding.

Before you think of purchasing the physical commodity, ensure that you have settled the issue of insurance and storage.

This is because as a precious metal, you are in danger of being robbed if you keep it in your house. That is why most investors will keep their investment in the bank or vaults instead of keeping it at home.

There are also a number of other factors that affect owning this precious metal in its physical form, which is why it is advised that you work with a gold company.

You can also check out these Goldco reviews to help you know which company to work with and what to expect from them. This is a crucial step to take.

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Buying Stock in Gold Mining Companies

If you do not want to go through all the stress that is associated with owning the physical commodity, you can invest in gold mining companies.

Theoretically, the company’s shares will go up whenever the price of gold goes up. This should therefore lead to an increase in the value of the inventory of the company.

This investment option has its ups and downs. One upside is that a company that has good management will maximize resources to enhance their mining operations for maximum extraction. On the flipside, management can also be so poor that the company will be running at a loss.

So, with good management, you get good returns on your investment but with bad management, you might lose your investment.

Other factors that can also affect your investment include the policies of the government where the company is located and the political and environmental climate.

This therefore means that you must understand all the risks that are involved in this option before you go into it.

Buying Gold ETFs

ETF means Exchange Traded Fund. To buy gold ETF means that you can invest in the commodity without buying the physical form of it. What you are buying is the fund that holds a number of different assets that are backed by gold.

The ETF may either mimic or track the trend in gold prices or include shares in mining companies or other assets that are backed by this precious metal.

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It is the underlying asset that determines the value that the ETF will carry. This means that it will be the major factor that determines the performance of your investment.

You can trade gold ETF like stocks; this makes them liquid and easy for you to sell off whenever you so desire. This is one of the major reasons why this option is considered a cheaper option for newbies than owning physical gold.

With the help of a savvy financial advisor and broker, you can always get the spot price and therefore have this precious metal as part of your investment without breaking the bank.

With this type of investment, you do not need to bother about storage and insurance. That is one of its major advantages. Check out this article for more on ETFs.

Conclusion

Investing in gold is not something that should be ventured into lightly. You need to do some research to know in what form you should invest in this precious commodity and which one will work best for you.

We have shared the basics of three ways of investing in this precious metal and we believe that this is a good starting point for you. Remember that it is safer to engage the services of an investment firm or advisor than to operate in the dark.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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