Tips To Avoid Gold Scams
Even though it is relatively easy to find and buy precious metal, there are some risks to consider. Avoid Craigslist, online dealers offering massive discounts, pawnshops, TV ads, cold callers and any dealer without a brick-and-mortar location, since there is no way of verifying that the dealer actually exists. Dealers that offer free storage or delayed delivery might not be legitimate, and you may never see the gold that you paid for.
Don’t give in to the pressure of late-night telemarketers insisting you call them immediately for a limited-time discounted rate on gold. Take your time to find a reputable dealer.
Don’t give in to the pressure of late-night telemarketers insisting you call them immediately for a limited-time discounted rate on gold. Take your time to find a reputable dealer.
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Why Debt Fuels A Gold Rush
London-based wealth manager Price Value Partners has been investing in both gold and silver on behalf of clients since the company was formed seven years ago. Its view is that the world is currently overwhelmed with debt, particularly government debt but also corporate and household debt.
So it expects governments worldwide to use inflation to reduce their debt burden. Says co-founder Tim Price: ‘In light of the quite extraordinary reflationary stimulus occurring everywhere, particularly in the United States, all commodities should benefit from rising prices, especially gold and silver that are regarded as hedges against inflation.’
Price Value currently allocates between 30 and 40 per cent of investors’ portfolios to assets including gold and silver. They also invest in gold and silver mining companies provided they can buy shares at a sensible price.
The company is increasingly buying other commodities such as aluminium, tin, copper and zinc. The gold stocks it invests in are generally small mining companies, usually in Australia or Canada.
A low-cost way to invest in gold is to put money into a fund that tracks the metal’s price.
David Henry, an investment manager at asset manager Quilter Cheviot, likes iShares Physical Gold. The fund has low charges of 0.15 per cent a year.
Jasmine Birtles is founder of personal finance and investment site MoneyMagpie.com.
Real Interest Rates Are Key Factor
The gold price hit bottom at the end of 2015, just as the Fed hiked its benchmark interest rate for the first time since the financial crisis. But the gold price and gold stocks didn’t really begin to shine until the fall of 2018, when the Fed’s plan to keep hiking interest rates triggered a sharp stock market sell-off.
Gold’s persistent strength starting in late 2018 was driven by a fundamental change in the Fed’s thinking about inflation. Even as unemployment fell to a 50-year low, inflation pressures were a no-show. After slashing its benchmark overnight lending rate close to zero, the Fed has said it won’t hike interest rates until inflation is firmly above its symmetrical 2% target.
Based on the most recent Fed projections, the first hike isn’t expected before 2024. However, the Fed could alter that outlook based on incoming economic and inflation data.
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How To Choose A Reputable Gold Dealer
Unquestionably, a company’s reputation is the number one criteria by which to evaluate and compare gold dealers. The single best measure of a company’s reputation is its transaction history, which can be assessed by customer reviews. Companies with a large number of reviews are typically more established or have built up their trust and reputation through a greater number of transactions.
Additionally, you should look for the following when evaluating a dealer’s reputation:
Caveats To Buying Physical Gold
Know where your gold is coming from
Gold mining can leave a significant toll on the environment, to say nothing of social, human rights and governance issues, as many gold mines are located in conflict-affected or otherwise high-risk areas.
In 2019, the World Gold Council took steps to implement guidelines for member companies, as did the International Council on Mining and Metals. Both require that participating mining companies publish information on their progress publicly, making it easier for consumers to find.
If youre buying gold bullion rounds or bars, its best practice to look for pieces stamped with information about the maker, weight, and purity of the gold.
When purchasing gold jewelry, some retailers are taking additional transparency measures similar to those implemented against so-called blood diamonds from conflict areas. Theyre often sold under the tags ethical or sustainable.
Understand the fees involved with physical gold
Buying physical gold entails a number of different costs that you wont find when investing in financial instruments. These include the storage fees in a bank deposit box or precious metals depository, insurance costs, transportation and delivery costs, transaction fees whose percentage is based on the value of the trade, and even fabrication fees. Gold dealers may also impose buy-back fees on any transaction. Small purchases may also involve processing fees and small lot fees.
Confirm the purity of your precious metals
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Sold Out Why Buying Gold Suddenly Got So Hard
Precious metals like gold are supposed to be reliable safe havens during a crisis. But what if they arent obtainable?
Gold is known for being a store of value in tumultuous times, and the global market meltdown thats now underway is driving that point home.
Physical demand for the yellow metal has spiked in recent weeks as people who are both new and experienced at buying gold rush for protection from economic turmoil. Major shortages of physical gold have developed, and the price of physical gold has risen noticeably higher than the spot price.
To find out more about whats going on, the Investing News Network reached out to a number of US-focused experts in the space. Heres what they said about why the yellow metal is suddenly in such short supply and what to do if you want to buy gold right now.
Is Buying Gld Shares The Same As Buying Gold
From the average investor or trader’s standpoint, buying GLD shares is the same thing as buying gold. GLD shares will replicate exposure to gold prices, minus expenses related to storing the gold and trading GLD shares. However, it is important to understand that GLD shares do not give you ownership of physical gold. You can’t trade in your GLD shares for the gold bars, for example.
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What Is Gold Bullion
Gold bullion refers to a Gold product that is valued by and sold mostly for its metal content and does not contain any numismatic or collectible value. Gold bullion often appears in the form of bars, rounds and Sovereign coins that carry a face value and are backed by a government. These products are most commonly categorized therefore as either .999 fine or .9999 fine Gold bullion, meaning the product is either 99.9% or 99.99% pure Gold.
Is Gold A Good Investment In A Recession
Gold has a reputation for being a recession-friendly investment when the stock market has a big pullback, the price of gold often goes up. But that’s not the full picture, says Deaton Smith, a certified financial planner and founder of Thayer Financial in Hickory, North Carolina. The idea is that its a safer investment than equities, but the long-term price valuations just havent been there.
In fact, when you look at longer time horizons, like the past 30 years, the Dow Jones Industrial Average a good representation of the overall stock market has significantly outperformed gold. And while the stock market has its ups and downs, investing in physical gold can involve a lot of unexpected costs and considerations, including insurance and secure storage.
Adding gold to your portfolio can help you diversify your assets, which can help you better weather a recession, but gold does not produce cash flow like other assets, and should be added to your investment mix in a limited quantity and with caution.
» Stressed about the stock market? Heres what to do when the stock market crashes
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What Influences The Price Of Silver
When it comes to silver, there are outside factors that do have a huge impact on how well silver is doing in the market. These are some of the outside influences on the price of silver:
The Need for Silver
Supply and demand has a huge impact on the price of silver. Supply affects the price because if there is more of a supply or little demand for what supply there is, this will negatively affect the price of silver as it would with any other commodity. If there is a limited supply with a large amount of demand, this will make the price of silver move higher.
Supply comes from a few different sources. One source of obtaining silver is through pure silver mining. Though in the grand scheme of things, only a small percentage of silver is obtained this way. It also comes from other metal mines as a by-product of mining. A final way of obtaining it is through scrap collections and recycling.
Demand is the side of this equation that will fluctuate more than the other.
Demand for silver comes from things like industrial uses, investing purposes, and for making jewelry. Demand for silver is a big factor when considering your investment.
Does the Economy Affect Silver?
The economy has a huge impact on the price of silver. This is because demand is so reliant on the economy. If the economy, more specifically the industrial portion of the economy, is thriving, than silver is something that will increasingly be needed.
How Does the Stock Market Affect Silver Prices?
Safeguard Your Assets By Investing In Coins Bars And Rounds
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Owning gold means having a valuable asset to protect your wealth and purchasing power for years to come. Investors invest in or buy gold to help guard against inflation and financial turmoil. Because it is inversely correlated to many other asset classes, it is a necessary part of any balanced investment portfolio. It is more than a commodity it is a better, more stable form of money that has been used for thousands of years. Its something everyone should own from seasoned investors to regular people looking for financial security.
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Why Investors Like Gold
Gold has a proven track record for returns, liquidity, and low correlations, making it a highly effective diversifier, says Juan Carlos Artigas, director of investment research at the World Gold Council.
These qualities are especially important for investors:
- Returns: Gold has outperformed stocks and bonds over certain stretches, though it doesnt always beat them.
- Liquidity: If youre buying certain kinds of gold-based assets, you can readily convert them to cash.
- Low correlations: Gold often performs differently from stocks and bonds, meaning when they go up, gold may go down or vice versa.
In addition, gold offers other potential advantages:
- Diversification: Because gold is generally not highly correlated to other assets, it can help diversify portfolios, meaning the overall portfolio is less volatile.
- Defensive store of value: Investors often retreat to gold when they perceive threats to the economy, making it a defensive investment.
Those are a few of the major benefits of gold, but the investment like all investments is not without risks and drawbacks.
While gold performs well sometimes, its not always clear when to purchase it. Since gold by itself doesnt produce cash flow, its difficult to determine when its cheap. Thats not the case with stocks, where there are clearer signals based on the companys earnings.
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How And Where To Store Your Gold
When people buy physical gold, they can store it themselves, have someone store it for them or do a combination of both. Some people keep it in a home safe, storage boxes, or in coin capsules at home. Others store it in a safe deposit box at the bank or other secure location. Safe deposit boxes at the bank are affordable but may offer limited access, based on the hours of the financial institution. The bank does not insure the contents of the box, which means separate insurance should be purchased.
The size of bullion is also a factor. Large bars can be stored in an insured bullion vault or a depository. This is a wise choice for investors with substantial holdings. Holding your metals in a depository may provide greater liquidity because it can generally be sold 24 hours a day, at least 5 days a week, anywhere in the world. Always inquire if a bullion vault is insured and the amount of insurance coverage provided. It is also possible to establish accounts for gold storage. It can also be delivered to a tax-sheltered account, such as an IRA.
When To Buy Gold
As with almost any other asset, the best time to buy gold is when its inexpensive but projected to increase, so you can sell high. While much has been said about golds seasonality, with prices rising through the middle of the year, and going down from late February to early July, this is not a hard and fast rule.
Remember that prices fluctuate considerably, and that different buying and selling strategies can make sense with your personal investment portfolio.
Generally speaking, experts recommend buying gold as a hedge against a financial crisis, when the cost of living tends to rise and gold is seen as a safe haven. This isnt necessarily the case during inflationary periods, as we explained above.
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Gold Buyers Facing Delays High Premiums And More
The upshot is that for the average person it is difficult, though not impossible, to buy physical gold right now. And those who can manage to find a dealer that has metal available will still face obstacles.
For example, people looking for gold may face delays in getting what theyve asked for.
You may not be able to get immediate delivery, which is usually a bad thing, said Michael Fuljenz, president of Texas-based Universal Coin & Bullion. I typically recommend you shouldnt wait more than 30 days to get a product. However, even with a reputable dealer the wait could now be 60 days.
Prospective gold buyers may also not be able to get the exact products they have in mind. Ive got Buffalo 1 ounce gold coins from the US Mint I can deliver. I dont have 1 ounce American Eagles, he continued. So you can get a US Mint bullion product you just may not get the one you want.
Blasi concurred, saying that the typical person will not be able to buy gold right now. He explained that although he has been able to make some bar purchases through his normal sources, it hasnt been enough to meet demand whats more, smaller denominations have been coming in only from the few individuals who are selling right now instead of buying.
When youre looking for things like Eagles and Maple Leafs, its really spotty its only if it becomes available in the secondary market. No new product is coming on, he said.
Here’s Why You Should Consider Buying Gold Stocks And Not Physical Gold
However, owning physical gold isn’t the best way to play this ongoing rally. Instead, you’re going to want to consider buying gold stocks or an exchange-traded fund that owns gold stocks.
Why mining stocks and not physical gold? First, the leverage is considerably greater with gold stocks. If gold rises another $100 an ounce, you’d make a little over 5% on your investment in the physical metal. But if a gold mining stock sees an extra $100 in average selling price, its cash operating margin per ounce will probably rise by a double-digit percentage.
Additionally, gold mining companies have the ability to proactively and reactively respond to market conditions. New mines can be brought online or costs can be reined in, depending on existing market conditions. That’s not something that’s a consideration with owning physical gold.
To build on this point, management teams and boards also have the power to reward shareholders through capital return programs. This may involve a dividend or share repurchase program. By comparison, physical gold offers no perks of ownership.
Finally, it’s a lot easier to peruse an income statement or balance sheet for a publicly traded company than it is to navigate macroeconomic data on physical gold.
In other words, it’s a no-brainer to buy gold stocks if you believe physical gold is in a long-term bull market.
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