Gold as an Investment
There is significant debate about the value of gold as an investment. In the one camp are people who believe that gold no longer has the same value as it once did. Now that paper currency is used as money, gold has no value other than being a pretty material that is used to make jewelry. On the other side of the argument are those who say that gold has an intrinsic value that makes it unique and that investors should include gold in their portfolios.
How to Invest in Gold
There are three main ways that people can invest in gold.
Because of the nature of gold, some people like to physically own gold, that is, have it in their possession. There are a number of forms that gold can take – jewelry is common in the form of heirlooms that may get passed down within a family and nearly half of the global gold demand is in the form of gold jewelry. People can also buy gold coins such as the South African Krugerrand. These coins can be bought from individuals, directly from a coin mint or through a dealer. It is important to make sure the dealer is reputable before you buy from them.
Gold Exchange Traded Funds (EFTs)
EFTs are a common way to invest in gold because while you are technically buying and selling gold, you never have to physically hold the gold. All the physical gold is held by a third party, while you are able to directly invest and trade in the precious metal. These types of mutual funds are popular as they offer a simple and cost-effective way to trade gold.
Gold Mining Stocks
Gold mining stocks are stocks in companies that mine the gold, not in gold itself. These stocks are more risky as the prices of the stocks fluctuate more than the price of the actual gold, but these stocks can rise more than the price of the gold itself. Many people prefer this indirect way of trading gold because of the higher potential profit.
The Stability of Gold as an Investment
The price of gold is quite volatile with big fluctuations, even over a 24 hour period. During times of recession, the price of gold tends to go up, but it doesn’t generally stay up long-term. For many people, gold is seen is a way to diversify so that you don’t have only one form of investment. Currently, gold prices are on an upward trajectory and while this may not last long term, looking back at history, gold seems to be a fairly consistent investment opportunity.
The Bottom Line
There are many factors to consider when deciding whether or not to invest in gold. You can consider inflation, a falling US dollar, a way to protect your wealth or a number of other reasons, but the main reason that gold is considered worthwhile as an investment, is for diversification. If diversification is your primary concern, then gold is a good choice.