Buying gold doesn’t merely mean buying physical gold. It also connotes investing in gold because many buy gold as a way to secure their assets. With the benefits of investing in gold, many are attracted to buy gold. However, many don’t know the vital factors that can affect how much your assets can grow.
That’s why before you buy any gold, you must do your due diligence to learn and understand it. Here are some things you should know:
- Different Types Of Gold
For many, gold only pertains to physical gold bars or gold jewelry. However, there are different ways you can buy or invest in gold. You can choose any of the following if you want to turn some of your assets into gold investments:
- Gold Coins: These coins are popular for collectors because of their potential to become more valuable. The price of gold coins depends on the demand and their rarity. Many collectible coins even have higher market values than other types of gold investments. One of the challenges of buying gold coins is their authenticity, especially if you’re not an expert in determining their authenticity. That’s why you should make sure that you buy from a reputable financial institution or dealer like Oxford Gold. By doing such, you can avoid buying gold-plated lead coins.
- Gold Bars: Other physical golds you can buy are gold bars or bullions. Nowadays, you can buy gold bars online by browsing online gold retailers’ sites and selecting gold bars by price, quantity, and weight. However, you should buy pure gold, which has, at least, 99.5% to 99.99% purity to meet the requirement of investment-quality gold bars. You can find this stamped on gold bars together with the weight and manufacturer’s name.
- Gold Jewelry: For this type of gold, you can buy it so that you can enjoy wearing it and passing it on to your heirs. However, it’s not the best option as an investment because its meltdown value is not as high as its original price.
- Gold ETFs: With this type of gold investment, you’re like buying shares of stocks. Gold exchange-traded funds (ETFs) allow you to invest in gold derivative contracts and not the actual physical gold. Because gold ETFs usually rise when fiat currencies decrease, you can hedge your investment portfolio from the risk of fluctuation. With such, you can trade these online by buying and selling.
- Storing Physical Gold
When you opt to buy gold bars or coins, you should know the importance of storing them. Don’t be like others who bury their gold at home. That is one of the worst ways to store your gold because it has no security or insurance.
If you insist on storing your gold bars or coins at home because you want to hold them from time to time, then you need to be careful and alert at all times. It’s because it’s hard not to let other people know you have valuable items at home. First, the delivery of gold coins or bars is an indication you have something valuable at home. Even if you plan to install safety vaults, you might attract the attention of other people. This is because you need experts to install the vault, which indicates you’re keeping something important.
That’s why investors prefer to keep their physical gold in banks or third-party storage firms. With reputable companies, you can ensure that your gold bars or coins are safe and secure. You can even ask your broker for recommendations because there are companies they work with. That way, you can ensure your physical gold’s quality when you plan to sell it in the future.
- Value Of Gold
One of the many reasons many buy gold in any form is its value. It’s even one of the most impactful and valuable metals humans have used since time immemorial. Now, gold’s price is around USD$2,000 per ounce, which is a doubled price compared with its price five years ago. That’s why this commodity is valuable even when the market fluctuates.
Here are some factors that make gold valuable:
- Currency Strength: This factor pertains to the influence of the US Dollar on gold. Globally, the price of gold is in USD. That’s why if the US dollar weakens, the gold’s price increases. If the US dollar strengthens, the price of gold weakens. When the US dollar weakens, other currencies can purchase more gold. As a result, the price of gold increases because the demand has increased.
- Inflation: Another factor that makes gold prices increase is the economy’s inflation. Because there’s an increase in money supply, inflation occurs. As a result, the paper currency’s value decreases, making gold commodities more expensive.
- Economic Performance: Globally, economic conditions can significantly affect the prices of gold. Because gold is a safe haven for your assets, people worldwide buy gold during economic uncertainties.
- Supply And Demand: Because mined gold is becoming scarce, especially as the demand is high, the gold prices increase worldwide. As the demand increases, so do the gold prices.
- Premium Payment With Gold
If you think that buying gold is only paying the spot price, then don’t. It’s because you’ll also be paying top-up gold premiums.
First, understand what gold spot market price means. It refers to the price basis for contracts wherein it’s not the goal to deliver them physically. That means that spot market price applies to gold, not to coins or bars.
Next, a premium is a top-up or additional payment together with the spot market price. This happens with gold coins or bullions, which have a primary goal to deliver to the buyer. Because physically delivering the gold includes handling, insurance, transport, and production expenses, the additional cost is added.
Overall, buying physical gold will include its spot market price and premium. So, don’t be surprised if you buy physical gold with a price different from the spot market price.
Buying gold is not like buying groceries wherein you can do it merely at stores or online. You need to consider many factors and one of which is choosing different types of gold. Because when you buy gold, you’re investing your money in it. Thus, you should choose the ones that can protect your assets against inflation because the value of gold increases as years pass by.
When you buy physical gold, you don’t simply place it inside your cabinet or bury it. Storing it means you should maintain its quality while securing it from possible theft. Moreover, you should have enough cash to spare when buying physical gold like coins or bars because there’s a premium you need to pay too.