The Disadvantages Of Gold
Physical Gold Bond: According to the Federal Trade Commission , the prices charged by merchants, banks, and brokerages for gold bullion and coins are almost always higher than the value of the gold contained in the product.
Additional Costs: There are many additional costs involved in buying physical gold. This can include security costs like safes or other storage, as well as insurance and transportation costs.
Possibility of fraud: Fraud is common in the physical gold market. Be sure to do your research, take the necessary precautions, and buy from a reputable dealer to avoid scams.
Low Yield vs. Equities: Gold tends to perform better when the stock market is turbulent, making it an attractive investment in tough times. Over the long term, stocks have historically delivered more returns than golds high rates of return.
If you are still confused, here is some in-depth information on gold investments.
Why Is The Gold Price Increasing In India
The country’s gold rates fluctuate frequently, depending on a variety of circumstances. A closer examination of current developments may reveal the cause of these shifts. The following are some of the most common influences on gold prices in India.âDemand: When demand outnumbers supply, gold prices rise. Because gold is a natural resource, it is limited in availability, and as supply decreases, gold prices rise.International ties: Because India relies on imports to meet its domestic demand, international trends have a significant impact on gold rates in India. Any changes in international relations could result in a shift in gold prices in the local market.âUS currency: When it comes to international gold pricing, the US dollar is crucial. When the dollar underperforms, gold does poorly, and vice versa, resulting in more expensive gold.â
What Conclusions Can Be Drawn From This
1. Well the obvious thing is to become a state yourself and boldly accumulate your own gold and foreign exchange reserves.
2. Acquisition of gold is a speculative investment of money because it does not add value .
3. It is recommended to keep gold in the amount of 5-10% of your investment portfolio because gold is a highly risky instrument . For instance over the past year, the market value has hardly changed, but during this time it managed to fall by 30% and rise again.
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You Dont Have Counterparty Risk By Buying Gold
Another reason to buy gold is that you also dont have any counterparty risk.
You just trade your money for gold and can take it with you right from the bank.
However, it is different when you buy other financial instruments since in case you invest in derivatives, you will have to deal with serious counterparty risk and if your counterparty goes broke, you may never get back your money.
Thus, gold can also be considered much safer in this regard since you will have no counterparty to rely on.
It’s Not A Passive Income Asset
As an investor, you expect that your investment should give you an income, right? Well, investing in gold does not provide payment. When you own bullions, for example, how will a solid metal give you income? If you are investing with the intention of becoming wealthy, then gold is not the one for you. Instead, look for an investment with a guaranteed income like a piece of land.
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Top Gold Brokers From Our Partners
APMEX
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- Safety
Perhaps the number one reason for golds popularity as an investment option is in knowing that the value is going to go up firmly over the years. Historically, you may see that the price dips once in a while but it always rebounds.
Looking at the historical chart as the big picture, you can safely predict that gold is going to increase in worth ten or twenty years from now.
In stocks, bonds, or mutual funds, you always have to hope that a specific company or industry is doing well because the value of your investment is largely dependent on their performance.
Not so with gold.
Although the current state of the economy does affect gold prices, a dipping economy does not automatically bring the gold prices down with it. In fact, it often does the opposite. When the economy is uncertain, people tend to invest more in gold, and this pushes the price even higher.
- Portfolio Diversification
Not many would realize it but investing in gold is an excellent strategy to diversify your portfolio.
Weve said that the price of gold performs incredibly well even during times of uncertainty. Therefore, a great approach to balance the volatility and returns within your investments is to make gold a part of the roster.
- Hedge Against a Disaster
Is Investing In Gold A Good Idea
This depends on your circumstances. Given what we said above, if your investments are heavily biased towards stocks, shares and other paper assets or if you own more than one piece of real estate investment, it wouldnt hurt to look into taking precautions.
Is investing in gold smart?
Most financial advisors open to a healthy diversification of assets suggest putting aside between 3-10% of a portfolio to gold. There are those who say 50%, but they are very much in the minority however given the predictions that the next crash will make 07-08 look like a sunny picnic, who knows.
It makes less sense if you dont have a lot of spare capital, or any investments. You wouldnt be hedging against investment risk, simply looking for asset appreciation.
While gold does go up in value and is known to rise steeply in financial crises, there are other investments that can perform better in the short term. They may be subject to the exact same risks that gold is used to protect against, but with a low cash sum to invest this could be more beneficial to you than the protection gold would offer. After all $5k in gold, even if it doubles in price during a banking and real estate crash is unlikely to be able to help you when your home is worth half and becomes a major financial burden.
For those with $25,000 or more to invest, gold suddenly becomes a very useful tool and its at this level that gold comes into its own.
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Different Ways To Invest In Gold
The best part about owning gold is that it isnt just limited to owning physical gold. For the savvy and interested investor, gold offers numerous avenues to benefit from the numerous advantages of this asset. Some of the most common ways of investing in gold are:
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Gold Futures
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Gold Bullion
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Gold Jewellery
Every kind of investment comes with its own set of advantages. What you choose mostly depends on you. If you are interested in having physical proof of your gold investment, ETFs or shares of a gold mining company wont be for you. You would do better with investing in bullions, coins, or gold jewelry. On the other hand, if your interest primarily lies in leveraging gold to profit from the rising prices, you should definitely invest in virtual forms of gold like ETFs or the futures market.
Con: Gold Investment Does Not Produce Constant Cashflow
One of the biggest downsides to gold investment is the lack of passive income. Gold bars and jewelry do not produce dividends. You will only profit if you decide to sell them.
For some, this can make it hard to turn a profit. Gold investment requires patience. Making long term investments is the best strategy, as significant price changes only occur after long periods. Dont commit to investing in gold when youre not willing to wait it out.
Be sure to consider these pros & cons before investing in gold. The multitude of options for gold investment will allow you to pick what suits your financial goals. However, gold investments main appeal remains: it helps investors minimize their losses, especially when markets are volatile and economies are on a tightrope.
At the end of the day, it is one of the best investment options for investors who are looking to diversify their investments.
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How Do Silver And Bitcoin Compare To Gold
Between the two, silver is much more similar to gold than bitcoin, but all three share a common trait as market or inflation hedges. Like gold, silver can also be used to make products or worn as jewelry. Bitcoin is a much newer asset, and without the centuries of data to draw on, its viability as a hedge is highly speculative compared to gold.
Is Gold Better Than Shares
This isnt a black and white, gold vs shares issue. Shares and gold both play a part in a well diversified portfolio.
Advocates for both sides of the argument can cherry pick periods of time where one has outperformed the other, or carefully select a basket of shares which have either performed terribly against gold, or taken gold out behind the woodshed.
The truth is, there are some excellent shares which have massively outperformed the market over a certain time. Others have vanished without trace, leaving investors holding worthless certificates.
Whether you are holding Apple or Enron, Google or Lehman Brothers is down to either blind luck, incredible market knowledge or the use of a good advisor.
And good advisors also tell investors to diversify their assets to de-risk and to hedge against other assets performing poorly.
When stock markets crash and they do tend to do this with an alarming regularity your hedges are there to protect you against calamity and when it comes to hedges there are few investments with the same proven history as gold.
At the time of writing our stock markets are seeing all time highs and alarm bells are ringing that prices do not reflect company earnings.
If youre not already big in shares and so havent enjoyed the journey upwards this is not a good time to enter the market. If you are already in, its time to start making some form of insurance policy against what could be around the corner.
Gold Investor Guide
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Gold Investing The Disadvantages
Like any other investment investors should be aware of the main risks of gold investing:
- Gold Isn’t A Passive Income Asset
A large number of financial experts, including Warren Buffet, espouse the convention that your investments should be income-generating. Gold fails this condition because it does not produce anything when you just buy and hold it.
If your objective is to amass a lot of wealth, then its better to find an asset that will make you richer.
Warren Buffet began in this direction even as a boy when he bought his first property. He knew that the value of the land would appreciate but above that, he also saw the potential of earning from the property.
Gold stocks attract growth investors more than they do income investors. These stocks normally go up and down in synch with the price of gold. However, you can find well-managed mining companies that are able to turn in a profit even when the price of gold falls.
You will see that the prices of gold stocks tend to magnify the increases in the price of gold.
- Gold is Risky Historically
Heres a fact: gold and stocks dont always behave the same way at the same time.
For example, when the stock market is booming, gold is dragging behind. Since the market has a proven track record of going higher over time, having gold as your sole investment could put you in a risky situation.
If you are a savvy investor, gold would fall last on your choices because it performs very poorly in relation to the other two.
- Volatility
A History Of Holding Its Value
Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. Since ancient times, people have valued the unique properties of the precious metal. Gold doesn’t corrode and can be melted over a common flame, making it easy to work with and stamp as a coin. Moreover, gold has a unique and beautiful color, unlike other elements. The atoms in gold are heavier and the electrons move faster, creating absorption of some light a process which took Einstein’s theory of relativity to figure out.
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Factors That Influence Gold Prices
Before getting into how you can invest in gold, it is important to understand the factors that can impact the price performance of this precious metal. Some of these include:
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US dollar: Currency movements are a strong influencer of gold prices, mainly the US dollar. There is generally an inverse relationship between gold prices and the dollar. When the dollar is falling in value, gold prices tend to increase. On the other hand, when the dollar is increasing in value, gold prices tend to decrease.
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Monetary policy: Interest rates can impact gold prices whereby high market interest rates can have a bearish impact on gold prices.
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Economic data: For the most part, in a stronger economy with indicators such as low employment, job growth, manufacturing expansion and GDP growth, gold prices can be pushed down.
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Uncertainty: Although very general, uncertainty can play a role in the price of gold. In particular, political uncertainty. This is partly due to the fact that gold is commonly viewed as a safe haven asset, which are investments that are expected to retain or increase in value in times of market volatility and downswings.
Tax Advantages Of Gold Investment
There are also great benefits of physical gold investment. Theres no VAT to be paid on investment gold. Also, unlike many other investments, theres no Capital Gains Tax to pay on profits of UK Sovereign and Britannia coins, as theyre deemed to be legal tender. Tax relief of up to 45% is available on qualifying gold bars as part of a pension.
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Why Invest In Newcore Gold Company
Newcore is number one in Africa for gold, proven, and stable jurisdiction, known for big, successful mines and government support
The company is one of the largest mineral property landholders in southern Ghana
The company is safe, reliable and secure
It is a top-tier record of making money for stakeholders
Other Companies Licensed to deal in Gold in Ghana are
Adfat company Limited
Gold Crest Refinery Limited
Gold Empire Resources Limited
To read more on some of the licensed gold operation companies in Ghana, click here Mining companies in Ghana
It Is Nice To Look At Your Gold Treasure
While gold can be used in many production processes and is also considered a safe haven during times of financial crises, investing in gold can also make sense since gold bars and coins can just be nice to look at.
Moreover, you can also buy gold as a gift for your loved ones and your family and friends will have something to remember when you finally pass away and they have a look at the gold coin you gave them many years after you passed away.
Thus, gold can also have some intrinsic value and can be a nice present.
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What Is Gold Bullion
Most newbie investors struggle to understand what the term gold bullion means and whether they should buy bullion bars or coins. In simple terms, gold bullion refers to the amount of refined precious metal measured in terms of weight and stamped either by a private mint or government.
The most common forms of gold bullion include:
- Bullion Bars/Ingots minted and struck by private mints and governments.
- Bullion Coins minted and struck by governments. Examples of popular bullion coins include the South African Krugerrand, the American Golden Eagle, the British Sovereign and the Canadian Maple Leaf.
- Bullion Rounds-minted and struck by private mints
Investing In Gold: The Ultimate Guide Benefits And Drawbacks
Investing
From ancient civilizations, through modernity and the 21st century, gold has been the preferred storage of value. Some have argued that gold is merely a barbaric relic that no longer holds the monetary qualities of the past. As we know, modern society has turned to paper currency as the preferred storage of value. Can the rise of digital currencies and financial technology be said to render paper currency obsolete? Probably not.
On the other hand, there are those that strongly assert that gold is an asset with many intrinsic qualities that make it unique and ever-more necessary for investors to hold gold in their portfolios. With that said, what are the reasons to invest in gold? And is gold-investing still as lucrative or as safe as in the past?
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Gold As An Investment
Before jumping on the gold bandwagon, let us first put a damper on the enthusiasm around gold and at the outset examine some reasons why investing in gold has some fundamental issues.
The main problem with gold is that, unlike other commodities such as oil or wheat, it does not get used up or consumed. Once gold is mined, it stays in the world. A barrel of oil, on the other hand, is turned into gas and other products that are expended in your car’s gas tank or an airplane’s jet engines. Grains are consumed in the food we and our animals eat. Gold, on the other hand, is turned into jewelry, used in art, stored in ingots locked away in vaults, and put to a variety of other uses. Regardless of gold’s final destination, its chemical composition is such that the precious metal cannot be used up – it is permanent.
Because of this, the supply/demand argument that can be made for commodities like oil and grains, etc, doesn’t hold so well for gold. In other words, the supply will only go up over time, even if demand for the metal dries up.
