Why should you invest in Gold?
Investing in gold serves as a good source of diversification for your investment portfolio. Bonds, stocks, real estate and other types of investments are vulnerable to changing economic times, but gold rarely changes; instead it rises and appreciates easily in value. During periods of economic downturn, when various asset classes fail, a precious metal such as gold may be what saves a portfolio; this is because gold is the only asset which is negatively correlated with other asset classes. Due to the negative correlation with other asset classes, gold can reduce portfolio volatility or risk. Many of the world’s billionaires and elites are increasingly purchasing precious metals such as gold, silver, diamonds, palladiums to mention a few. They know that value is stored, and no matter the economic condition, their precious metal endures.
Apart from its aesthetics, gold’s unique physical property which includes being virtually indestructible, has given it a special place in the history of the world.
What makes gold highly priced and valued?
It is the supply; nature itself limits the supply of Gold. It is very scarce to lay a hold of, and scarcity can bring a hike in prices. Gold is also very hard to produce, because thousands of pounds of ores are required to produce just one precious ounce of gold.
There are four major sources of gold that makes up the supply for gold; they are:
- Gold from new mine production
- Reclaimed gold: these are gold reclaimed from jewelry, dentistry and other sources.
- Official or central bank sales
- Gold loans made to the market from official gold reserves for borrowing and lending purposes.
Gold is also very important for the finance industry and the manufacturing industry; it is the availability of the metal that permits some derivative transactions to be effectively carried out by participants such as hedge funds, refiners and gold mining companies.
Gold is demanded mostly by the jewelry industry, it can be used to carve out beautiful earrings, rings and chains that are appealing to the buyers. Other top buyers of gold include industrial applications, investors, aerospace, medicine, electronics and dentistry. Gold provides superior electrical conducting qualities, and it is corrosion resistance; the electronic industry utilizes this unique property of gold to manufacture electronic devices such as telephones, computers, televisions and other equipment.
They are five international trading centers for gold they are located in New York, London, Zurich, Tokyo, and Hong Kong. They provide a 24hour access to trading in gold; this makes gold one of the most liquid of the world’s access. The gold market is open every minute of the day, and by so being, it can be readily sold by investors who need cash quickly. This cannot be said of most investments including stocks and bonds.
How you can invest in Gold
Gold bullions are for investors, they involve the buying of gold bars in a variety of weights and sizes. Holding gold bars are cost effective because broker commissions on buying and selling gold bars are minimal. Investing in gold bars might as well be the most cost efficient means of owning gold.
Gold bullion bars can be purchased from selected commercial banks, brokerage houses and precious metal dealers.
Gold bullion coins
Gold bullion coins are coins made from precious metals (gold in this case), that are generally used for investment purposes. The coins are legal tender, and its authenticity is guaranteed by the country of origin. Bullion coins are easily traded; they can be bought and sold virtually anywhere in the world.
Gold futures contracts
Futures contract are contractual agreements, to make or take delivery of a specified quantity and quality of a commodity during a specific month in the future at an agreed upon price. Futures contract are generally made on the trading floor of a futures exchange. Some futures contact may call for physical delivery of the asset, while others are settled in cash. The futures price for gold is determined by the markets’ perception of what the forward carrying costs for gold ought to be at any point in time.
An option is a contract which gives the holder the right, but not the obligation to buy or sell an underlying asset at a specific price on or before a certain date. So a gold option gives the holder the right, but not the obligation to buy or sell gold at a predetermined price by an agreed date, for which privilege the holders pay a premium.
Gold futures options are also traded on the floors of regulated commodity exchanges such as the New york Mercantile exchange COMEX Division and the Bolsa Mercadorias & de futuros (BM&F) in sao Paulo, Brazil.
Michael Maloney.,Rich Dad’s Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future.