How To Invest In Precious Metals
There are two main ways to invest in precious metals:
When you buy the precious metal outright, you might feel like youve struck gold . Just like when you hold a dollar bill in your hand, you have the security of being able to actually have your investment in the form of gold bars or silver coins in your hand .
With ETFs, you buy stock in the precious metal of your choice. That stock is tied to the current value of the gold, platinum or silver that you invested in. Just like the stock market, investing in ETFs is a digital game, allowing you to move things around with the click of your mouse.
I dont buy precious metals at all because I like my moneyI dont want to lose it. That simple. Dave Ramsey
Cash Is Probably Safer
At the end of the day, cash is likely the safest of the safe-haven assets you can own. If you are worried about the stock market, it’s probably better to stash some more money in cash than it is to buy gold after an already swift and material price advance. Cash won’t do much for you in today’s low interest rate environment, and inflation will eat away at its value over time, but it will keep you from losing money if the stock market falls sharply. And if a bear market does show up, you can put your cash cushion to work.
As a compromise, you might consider using the money you would have put into gold to augment your cash position. That will provide extra safety now, and when gold prices have pulled back from their rapid ascent you can reconsider adding some precious metals exposure without the risk of getting caught up in the current gold hype.
Gold Stocks And Exchange Traded Funds
The primary advantages of stocks and ETFs are that you don’t have to store the metal, and there is potential for earning dividends. Besides individual mining stocks, there are also mutual funds available that invest partially, or exclusively, in mining companies. These can provide diversification into other precious metals, such as platinum, palladium, and silver. You can also purchase options on gold futures contracts at an established strike price.
ETFs hold bullion on your behalf. The symbol for the SPDR Gold Shares ETF is GLD. The ETF trades intraday, like stocks, and benefits from relatively low expense ratios.
Gold stocks don’t necessarily move in concert with bullion prices, because mining companies succeed or fail based on their individual operating performance. You don’t have the security of physical possession of the metal if the companies you buy are unsuccessful.
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Protective Assets Does It Make Sense To Buy Gold For Hedging Risks
How to protect assets during the crisis? This question becomes urgent not only for professional investors but also for regular citizens, who suffer the crisis influence in all its entirety.
We will consider the following topics in the article:
- Gold during the 2008-2009 crisis.
- The gold growth during the coronavirus pandemic.
- Hedging risks: gold as an alternative currency.
- Other protective assets: US Treasuries, Yen, Franc, etc.
- Bitcoin as a new alternative currency digital gold.
The coronavirus pandemic became a classical Black Swan for the world financial markets in the very beginning of 2020. The chain reaction initiated a cascade crash of assets in March. Investors are frightened by the developing economic crisis and look for safe harbours, where they can wait till dangerous months are over and hedge their risks in the stock market.
One of the most promising variants is gold, for which a number of experts predict a significant growth and reaching new historic highs. Lets see why the yellow metal is so attractive in the current conditions and what other alternatives are available in the financial markets.
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Five Things You Need To Know Before Buying Gold
I offer insights into gold and silver investments, the precious metals industry as a whole and am the CEO of American Hartford Gold.
Theres been a lot of talk about gold in the news the past year. I have been asked a variety of questions about investing in it throughout my career in the precious metals industry. Here are five frequently asked questions and what you should know before buying gold:
1. Why purchase gold or silver?
In stable times, I believe that at least 10% of ones portfolio should be allocated to precious metals such as gold and silver for the purpose of diversification, and many experts, such as Ray Dalio, hold similar views.
The stock markets plunge in March 2020 hurt countless Americans. Retirement accounts that took decades to build followed the markets performance into double-digit losses.
Stock market volatility aside, the value of the dollar has been consistently diminishing. What does that mean for anyone holding cash reserves in their bank? A corresponding loss in purchasing power. Precious metals, which have increased in value the past several years, can offset that loss, with investors using the inverse relationship to protect their portfolios. Precious metals are a way to hedge against inflation and can even add stability to retirement accounts.
2. Is now a good time to buy gold?
What does all that mean?
A $100,000 investment in gold in 2000 has the purchasing power of about $535,000 today.
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Shop Around Before Selling Your Gold
Amanda Gizzi, spokesperson for jeweler trade organization Jewelers of America, says that getting more than one offer and selling to a reputable purchaser are important steps to selling gold and jewelry safely for a fair price.
Shopping around is a good way to understand the average price you can expect, Gizzi said. If you can find a jeweler that you like to buy jewelry from, you may find you get a higher amount if you use the money toward another jewelry purchase.Kate Mars, who lives in Arlington, Virginia, went by recommendations from people she trusted when she sold jewelry and a coin collection from a safe deposit box left when her father died.
Through the estate lawyer, she found a coin dealer in nearby Frederick, Maryland, where the dealer gave Mars a sense of security as he went through her books of coins and told her what had value.
The jewelry had been appraised for the estate and none of it was particularly valuable, Mars said. She took that to a jewelry store that was recommended to her — and that had been in business for a long time. The people were nice, she said. They looked everything up…Even if I could have made a few more bucks , I am happy with the experience.
Invest In Physical Gold
Physical gold is worth holding because it’s a universal finite currency, held by most central banks. In the same way that the family home should not be regarded as an investment, gold bullion is not an investment per se, rather a form of saving for a rainy day or of financial insurance. You shouldn’t trade your gold. You wouldn’t trade an insurance policy, so don’t trade your gold.
Gold is a good way to ensure wealth preservation and for passing wealth from one generation to the next. Once you’ve got some gold bullion in your portfolio, then other investments such as mining shares, investment funds and other more speculative gold investments can be considered.
If you want to know where to buy gold bullion, read on here
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History Of Gold Investment
Since the stock markets began, gold has gained a reputation to have a negative correlation to stocks and a positive correlation when compared to inflation. However, goldâs history as a financial asset and store of value began long before this.
Gold coins were minted and used as currency as far back as 550BC, but gold was known as a sign of wealth long before its use as a currency. Treasures containing gold have been discovered from as early as 4000BC, so the precious metal has been notorious for its relevance to power and wealth for many millennia.
However, it was not until the late 1800s when gold gained its value in contemporary finance. The majority of nations adopted the gold standard, which involves fixing the value of their currency to the price of gold. Since, the gold standard has been dropped and readopted in many countries until it was finally replaced by freely floating fiat currencies in 1971.
The price of goldâ remained relatively stagnant until the 2008 financial crisis, when the price of gold rose from around Â£15 to Â£30 a gram in the following years. This spike in price was in response to the adoption of quantitative easing by central banks. The justification of goldâs appreciation in value follows the general logic that QE creates inflation, and gold prices generally rise alongside inflation.
Pandemic Affects Consumer Gold Sales
More and more consumers are looking to sell gold items, according to Gary Smith, past international president of the American Society of Appraisers , even if gold prices arent particularly high right now. Part of the reason for the heightened interest in selling? It’s a bit dark: The high number of deaths from COVID-19 has left survivors to sell property owned by their deceased relatives, Smith said.
Also, people facing financial hardship because of the pandemic are looking to sell gold and other items. People have actually come into our facility with very low-value jewelry, said Smith, who owns PA Gem Lab in Montoursville, PA. They need money and theyre willing to sell grandpas class ring. It is a sad state and people are hurting.
With all this need, scams abound, according to Smith. So its wise to be cautious when selling your gold and jewelry. As with most things, knowledge is your key to success.
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Gold Is A Crisis Investment
It may be smarter to think about gold not as an asset to buy in a crisis but an asset you will be happy to already own when a crisis happens. Fear is a powerful motivator on the market, and it lays behind many investor decisions. When stock markets tumble, investors race for safe haven assets like gold, and prices have always been at their highest after stock market crises, periods of high inflation, and when the U.S. dollar is low. When the race for crisis investments begins, you will be glad you already own gold and can enjoy higher appreciation than those who waited.
You can learn more at Silver Gold Bull about how prices have behaved historically. Bullion dealers have a wealth of resources about investing, whether gold is right for you, and how prices have moved in the past.
Gold As A Diversifying Investment
In general, gold is seen as a diversifying investment. It is clear that gold has historically served as an investment that can add a diversifying component to your portfolio, regardless of whether you are worried about inflation, a declining U.S. dollar, or even protecting your wealth. If your focus is simply diversification, gold is not correlated to stocks, bonds, and real estate.
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A Brief History Of Gold
In order to fully understand the purpose of gold, one must look back to the start of the gold market. While gold’s history began in 2000 B.C, when the ancient Egyptians started forming jewelry, it wasn’t until 560 B.C. that gold started to act as a currency. At that time, merchants wanted to create a standardized and easily transferable form of money that would simplify trade. The creation of a gold coin stamped with a seal seemed to be the answer, as gold jewelry was already widely accepted and recognized throughout various corners of the earth.
Following the advent of gold as money, its importance continued to grow throughout Europe and the U.K., with relics from the Greek and Roman empires prominently displayed in museums around the world, and Great Britain developing its own metals-based currency in 775. The British pound , shillings and pence were all based on the amount of gold that it represented. Eventually, gold symbolized wealth throughout Europe, Asia, Africa, and the Americas.
What Is The Best Way To Buy Gold
If you’re looking to buy physical gold, buying online is probably your simplest option. Reputable dealers will sell marked gold coins and bars that show information about their origin, weight, and purity. When buying online, make sure that the seller fully insures their shipments. If buying stock or ETFs, consult with your financial advisor and procure stock through well-known stockbrokers or trading apps.
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Before Selling Your Gold Talk To An Appraiser
The first step, Smith said, is to talk to an appraiser. Smith pointed to the ASA, as well as the National Association of Jewelry Appraisers and the Appraisers Association of America as the major organizations in this area. In addition, he said theres an organization for retailers called the American Gem Society.
Appraisers who belong to one of these organizations must abide by strict codes of conduct and ethics, Smith said. All three of these outfits maintain databases on their websites where you can find an appraiser near you. For a small fee — perhaps as low as $20 — one of these independent appraisers can give you a quick assessment of what you have and what it should fetch, along with whether a piece of jewelry has intrinsic value beyond the gold weight and if the gems are real.
That should be enough, Smith said, to give consumers what they need to know to sell their items for a fair price. A seller shouldn’t need an expensive, written appraisal, such as might be required for insurance coverage.
Most appraisers are pretty lenient that way, Smith said. Were here to help and from ASAs standpoint, were here to educate the general public. Appraisers, he said, want people to get value for their money.
Buying Physical Gold Bullion
This section will briefly review the various physical forms in which you can buy gold and silver bullion, and will discuss the system used to assure authenticity of gold and silver bullion stored in bullion banks. Ill revisit paper gold and discuss its strengths and weaknesses later in this article.
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Is This A Good Time To Buy Gold And Silver
Most people who want to speculate want to buy something going up. The best time to buy, however, is when something has stopped going down.
It is said to be impossible to buy at the bottom and sell at the top, but there is a market asymmetry that can help an investor. It is much easier to buy at the bottom of a crushed instrument than sell at the top of a rocketing one. This is because the bottom of many markets is when no one cares to trade while the top is when everyone is thrashing around.
There will be a balancing element in there somewhere and that will be a time function. A top will be a fast market for big gainers while a bottom will be a slow one. You wont have to wait long for the tumble from the top in a fast market but you will likely have to hang around for a rise from a low in a slow one.
These niceties need not worry the investor in the same way as they might bore the time sensitive trader. An investor isnt looking to ride the next wild thing and doesnt mind capital lying about waiting so much. This is especially true for the precious metal investor.
I use the word investor loosely because precious metals are, in reality, insurance, so there is an element of negative returns about holding them. This and the strong probability that commodities are a negative sum game, takes the edge off locking money up in silver and gold.
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Technicals aside the two big questions to decide on holding gold and silver are:
Always Store Outside The Banking System
Physical gold is the antidote to the current system. The current banking system is based on credit, paper, and computer digits. The crisis that we are expecting the reason so many people are buying gold to protect themselves will be a huge banking crisis. Therefore, if you decide to purchase physical gold, its only logical to store it outside of that banking system.
Property rights in the banking system are of a temporary nature. Banks in the past have confiscated physical gold and cash, and there is always the possibility of a bail-in where all assets will undoubtedly be confiscated.
Some might argue that you could have a safe deposit box, but most of the time those are not insured. Besides, during harsh crises in the past, the bank was either closed or didnt have the amount of gold they claimed to have.
This problem started back in the 1980s when banks brought mathematicians into the system who argued that they didnt need all the gold on hand. They surmised that banks probably only needed 25% on hand. So, banks began to lien out or even sell 75% of their gold. Some invested it into government bonds where they received a guaranteed return on the investment. Little by little, much of the gold in the banking system disappeared.
The bottom line: dont put your gold in the banks. You dont want to take that risk.
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