Business

Should You Invest in Gold?

As we move on past the financial devastation of the coronavirus pandemic, a lot of us are left wondering how we can bounce back to our feet.  I know that I am far from the only one who had to dip into my savings account to keep paying rent.

What do we do now, though?  There are a few options, but the most important thing to do is start building up our investments again.  Paper currency is a bit dicey today, given the rapid rates of inflation happening not just the United States but globally as well.

That is why so many people are turning to more traditional forms of currency like precious metals, most notably gold.  We’ve all heard of pirates hoarding treasure, or even dragons.  The reality is far less fanciful, but no less valuable if done right!

How Gold is Graded

If you’ve ever heard the term “karat” or “carat,” it’s referring to the quality of this metal.  You can read up on that more on this page: https://www.britannica.com/technology/karat.  A karat of gold is a certain percentage, approximately four-point six percent, of the entire bar.

The quality and purity are measured by how many parts of gold versus alloy are in it.  So, for example, sixteen karats are that percentage of the metal itself.  The higher the amount, the purer the metal is.  This is mostly important for storing bullion in an IRA account, since only certain percentages are allowed.

Ways to Invest

If it seems like a promising venture for you, you might be wondering how to actually start.  First, let me explain some of the different ways you can invest in precious metals.  You don’t have to own the physical product, though that is of course where we will start.

Bullion

This is what bars of metal are called.  In the past, they were often quite large and thus very difficult to store.  Today, usually they are a lot smaller and easier to transport.  This is for ease of storage and for convenience in trading.  After all, it is hard to cut a large bar of pure metal in half to sell if you don’t want to do it all at once.

Keep in mind that you will probably only be able to get silver or gold bullion.  Palladium and platinum, the other metals usually considered precious, are not made into it often.  This is because they are more valuable and it’s almost a waste to make them into a bar.  You can learn more about GoldSilver.com if you are interested in purchasing physical goods.

Futures Contracts

This one is a bit confusing, especially for first time investors in something like commodities.  Why would you pay up front for a product that you won’t receive immediately?  Well, if you play the market correctly, it can actually work out in your favor.

The best time to try this method is to buy the gold when the price is low.  Watch the markets and sign the contract, because the price you paid at the time of making it cannot raise even if the price of the good raises over time.  If it does increase, you can then make a nice profit off the investment!

It does come with a risk, though.  You might end up paying more for the metal in question if the prices decrease across the board.  However, that does not happen often given the value of most precious metals and the demand for them globally.  So, while the risk is there, it’s not something you should worry about too much.

Exchange-Traded Funds

This is another one that can be hard to wrap our minds around.  I know I did not understand what ETFs are for a long time.  However, it is not as complicated or intimidating as it might seem when you start to read about it.  You can read about that here: https://www.cnbc.com/select/what-are-etfs-should-you-invest/.

At their core, they are like a bucket.  Usually, they are filled with stocks, bonds, and other types of securities.  In this way, investing in them is like getting involved with stocks but allows for a lot more variety in your portfolio.

If you purchase a gold ETF, usually it tracks the metal commodity.  This can save you a lot of time and effort if you do not feel like dealing with the physical product.  After all, that usually means you need to get a custodian involved or figure out another storage solution.  ETFs don’t have that baggage.

Certain Stocks

Obviously, not every stock on the market is relevant here.  However, those for a mining company might be a way to invest in the gold industry without directly purchasing holdings.  This is a nice way to make money back in two ways, since the company you purchase the stock in can both increase production over time and sell for higher prices as demand increases.

However, if you are looking to do this, make sure you understand what company you are purchasing stock in.  This is where the big risk factor is in this method, since if the business sinks, your money is lost.  Make sure to consider all of this before you begin.

Is it Worth it Over Time?

If you know anything about the historical trends of gold, you probably know that the answer to this question is yes.  You see, for a long time the world operated under something known as the Silver Standard.  However, in the twentieth century, the last holdouts swapped to the Gold Standard.

While it is not as relevant anymore, it is still used to some extent.  The metal still retains its value even after centuries of use.  That’s a pretty good guarantee that you will not lose out on your initial money and will instead be able to make a hefty profit.

If you’re skeptical, feel free to consult with your financial advisor or another professional.  They can guide you the process and help you understand the pros and cons!

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button