How to Invest in Gold

Gold has symbolized wealth and prosperity throughout history, so it’s no surprise that many people find it a very attractive investment for a number of reasons. Read on if you’d like to learn more about how to invest in gold.

The Value of Gold

Gold is valuable because it is rare, because it is prestigious, and because we as a society have deemed it valuable. We value gold in part because it is shiny and malleable, which makes it ideal for use in jewelry and coinage. The jewelry industry accounts for about half of the demand for gold worldwide, with another 40% being held as investments (coins, bars, bullion, and so on). Most of the remaining 10% is used in fields such as dentistry, electronics, and so on.

Gold is considered a limited resource. It is actually quite plentiful in nature, but difficult to extract in quantities that are worth the time and energy. However, since there is not that much of it in use at any time, its rarity adds to its value.

Gold is traded as a commodity, based on supply and demand. The demand for gold to be used in jewelry is fairly steady, but the demand for gold as an investment does fluctuate. It is often the opposite of the economy and the market in general, since gold and gold futures are often bought as a hedge. Therefore, gold tends to hold its value very well when the rest of the economy is headed downward.

Buying or Investing in Gold

There are plenty of different ways to invest in gold, including buying jewelry and coins, gold certificates, futures contracts, gold stocks and funds, mining stocks and funds, and more. All these methods have their advantages and disadvantages, but what potential investors should know is that gold is a notoriously volatile investment.

While it’s good to have some gold and other precious metals in your investment portfolio, it’s also important to limit your exposure. One way to do this is to make small but steady investments over time. This offers the diversification you need and also allows you to use dollar-cost averaging to maintain your positions.

Gold is perceived as glamorous, so there are people out there who try to capitalize on this perception. By all means, if there is a piece of jewelry or a commemorative coin that you want for its aesthetic value and you can afford it, you should enjoy it for what it is.

But if you’re looking at gold jewelry, gold coins, or gold in general as an investment vehicle, it’s important to do your research. It can be a very solid addition to a well-balanced portfolio, but it’s also frequently used as bait by scammers and swindlers.

Make sure that you know exactly what you’re buying, whether it’s a physical piece or a certificate of some sort. If the seller is legitimate, they won’t mind if you do your research and ask informed questions; in fact, a reputable seller prefers to do business with buyers who know exactly what they want to buy.

Gold Chart