How can I invest in gold as a beginner? Is gold a viable investment option for me? Should I get started right away, or should I simply forget about trying to invest in gold? Welcome to yet another interesting article in which I will take you through the basics of investing in gold as a beginner. With the information presented herein, it is my hope that you will be better placed to get started on the right foot (or to even stay away from gold investments if need be). Let’s hop right into it.
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Is gold a valuable asset?
If you talk to different financial advisors today, they will have different thoughts about gold as an investment asset. This should not surprise you, since there are also conflicting thoughts surrounding other types of assets. When it comes to gold, however, there is one thing that not many will dispute- that gold has its unique properties and intrinsic value.
Investors who have gold in their investment portfolios strongly believe that there is no one time that gold will be worth zero dollars. The fact that it finds utility in different industries means that at any given moment, someone will still want to pay some money to acquire this precious metal.
In the present day world, gold is used by people from various walks of life. It is worth noting that half of the world’s demand for gold is from the jewelry production industry. About 40% of the above-ground gold is purchased by investors in the form of gold bars and coins, for the purposes of investing. The remaining 20% is used in various technological manufacturing industries, including the medical industries.
Is Gold a good investment?
The answer to this question highly depends on your motivation to purchase this precious metal. Generally, if you are looking to make some quick money in the short-term horizon, not all approaches to investing in gold will benefit you. In such a case, I would actually not be a strong proponent for gold, unless you have some large volumes of money and are willing to take a risk.
If you are, however, looking for an investment asset to hold over the long-term horizon, then gold is worth considering. Gold has a couple of benefits, including:
- It is a great hedge against inflation
- You can use it to diversify your investment portfolio
- Gold can protect your portfolio from the effects of the declining U.S. dollar
- It is negatively correlated with the stocks market (when the stocks market is taking a nosedive, gold prices are usually on the rise).
All the above benefits cumulatively make gold the go-to asset for any investor who is looking for safety and stability.
N.B: The above benefits can only be reaped by those who purchase physical gold (gold coins and bars) through a gold IRA.
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The best ways to invest in gold as a beginner
When it comes to investing in gold, the first thing that comes to people’s minds is how they will purchase gold jewelry and resell them later. There are however other legit and IRA-approved approaches to investing in gold that you can benefit from as a beginner, including:
This refers to any form of pure gold. You can purchase gold bullion in the form of gold bullion coins or gold bars. Gold bullion must be certified for weight and purity and must be accompanied by a serial number for security reasons. As a beginner, you might want to make your entry into this industry by purchasing gold coins. Unlike gold bars, the coins offer the promise of liquidity, in that there are many willing buyers in the market who can purchase your gold bullion coins if need be.
You can also invest in numismatic/semi-numismatic gold coins. My advice would be that you only purchase these such coins if you are willing to invest some time into research, to establish which coins have the greatest potential for profitability in the future. I would also recommend that you invest in numismatic and semi-numismatic coins as an approach to diversifying your precious metal investment portfolio, not as your primary fund allocation assets. The reason behind this is that most of these coins have collector’s value attached to them, and this can affect their overall value in the market.
- Gold Mining company stocks
This is also another interesting approach to investing in gold. If you are an avid stocks investor, then this is an option worth considering. By buying shares in a company that mines gold and develops precious metal reserves, then you can gain exposure to gold.
The good thing with this approach to investing is that even the spot price of gold is not that impressive (depending on your entry price), the gold mining company’s balance sheets can boost the stock prices, making it possible for you to earn huge amounts of money in profits.
The downside to investing in gold mining company stocks is that they do not offer protection against instability in the global economy. You may, in fact, discover that the prices of most gold mining company stocks move in the same direction as other stocks in the stock market.
Now, this is one option that you should only consider if you have experience dealing with futures contracts, or are getting the assistance of an expert in this area. Simply put, futures are contracts to purchase and sell assets at a certain point in time. For gold futures, each contract is meant to represent a fixed amount of gold that can either be paid out in cash or gold, at a certain point in the future, based on the terms of the contract.
Investing in gold futures is often viewed as a challenging terrain that has many risks, and is best suited for investors who are quite experienced with the execution of futures contracts, and those who have enough capital to try out into this investment approach.
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Thank you for making it to the end of this article in which we have responded to the question:” How can I invest in gold as a beginner?” I hope you found it helpful, and that you’re now better equipped to get started on the right foot. Let me know whether you have any more questions about investing in gold as a beginner. You can drop them in the comments section so that I can respond to them ASAP.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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