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It's no secret that gold is a valuable commodity.
Throughout history, it has been used as a form of currency, and today, many people still invest in gold as a way to protect their wealth against inflation and global economic uncertainty.
Here are just a few reasons why investing in gold is still a good idea! In this article, we will discuss in detail the most precious metal of them all - gold!
Investing In Gold - A Brief History
In this guide to investing in gold, we’re going to try and cover all the basics... (no, we’re not going to go super deep here, this is a top level guide).
But first, let’s start off with a brief history lesson in gold:
According to Focus-Economics.com:
“People most likely first discovered gold in streams and rivers all over the world with its beauty and luster catching the eye. The known history of gold goes back a long way, so far back that, according to the National Mining Association, it was first used by cultures in modern day Eastern Europe in 4000 BC to make decorative objects. Gold was generally used for a couple thousand years solely to create things such as jewelry and idols for worship. This was until around 1500 BC when the ancient empire of Egypt, which benefited greatly from its gold-bearing region, Nubia, made gold the first official medium of exchange for international trade.”
In other words... People have been coveting gold for a long time.
And in recent times gold has been discovered to be an amazing conductor of electricity and, along with other precious metals like platinum and palladium, has begun to be used with more and more frequency in industrial use cases like computer chips.
Needless to say, gold continues to be a great investment, and will likely remain so for the foreseeable future.
How Do Gold Prices Affect The Stock Market?
Gold is often seen as a safe investment during uncertain economic times. When the stock market is volatile, gold prices tend to rise.
This is because investors view gold as a stable asset that will hold its value if the stock market crashes. As a result, gold prices can have a significant impact on the stock market.
When gold prices go up, gold mining stocks and other commodities usually follow suit.
This is because gold bars become more valuable when the price of gold goes up, and gold miners are able to sell their gold for a higher price.
This in turn leads to higher profits for gold mining companies, which are reflected in their stock prices. On the other hand, when gold prices fall, gold mining stocks usually decline as well.
Due to this, gold bars become less valuable when the price of gold goes down, and gold miners are forced to sell their gold for a lower price.
When the price of gold is high, it can have a ripple effect on the stock market. For example, companies that mine and produce gold may see their stock prices increase. On the other hand, jewelers and other businesses that use large amounts of gold may see their profits squeezed as they have to pay more for the raw material.
Live Gold Prices
For a look back at gold prices over the last ten years, we’ve got this handy live chart of precious metals for you:
Benefits Of Gold Investing In 2022
Let's discuss the benefits in detail!
Here's a list of advantages:
Gold Is A Safe Haven Asset:
With increasing global uncertainty, gold has emerged as a safe haven asset. Investors usually turn to gold during times of economic or political turmoil. This is because gold is seen as a store of value and a hedge against inflation.
Gold Is A Good Diversification Tool:
Gold can help diversify your investment portfolio and reduce your overall risk. This is because gold prices are not strongly correlated with other asset classes such as stocks and bonds.
Gold Is An Excellent Long-Term Investment:
Historical data shows that gold has outperformed most other assets over the long term. For example, gold prices have risen by an average of 10.61% per year since 1971. This makes gold an excellent investment for those looking to invest for the long term.
Gold Is A Liquid Asset:
Gold is a highly liquid asset, which means it can be easily bought and sold. This makes it easy to convert your gold investments into cash if you need to.
There Is A Limited Supply Of Gold:
Gold is a scarce commodity with a limited supply. This is because it is difficult to mine and there are only so many reserves left in the ground. The limited supply of gold means that its price is likely to continue to rise over time.
Gold Is Durable:
Gold is a very durable metal and does not corrode over time. This makes it an ideal investment for those looking to hold their assets for the long term.
Gold Is Tax-Efficient:
Gold is a very tax-efficient investment. This is because Capital Gains Tax does not apply to gold bullion held in a private capacity.
Is Buying Gold A Good Idea Right Now?
There's no denying that gold is a precious metal. It has a long history of being used as currency and jewelry, and its unique properties make it resistant to corrosion and perfect for industrial use cases.
These days, gold is very popular as an investment to hedge against inflation, and many people purchase physical gold or invest in gold-based mutual funds or even IRAs.
That depends on a number of factors, including the current gold price and your personal financial goals.
If you're looking for a short-term investment, then gold may not be the best option, since its price can be volatile.
What About Gold Coins?
A gold coin is made mostly or entirely of gold. Pure gold is 24 karat, but because pure gold is too soft to produce functional currency, it is often alloyed with copper and silver to create a more durable coin.
The gold content of a coin can be determined by its karat designation.
These coins usually have a face value that is backed by the government which issued them.
Gold collector coins are another popular type of gold coin, and these are often worth more than their face value.
Gold commemorative coins are also popular, and these are typically issued to mark a special event or anniversary.
Finally, there are gold investment coins, which are designed for investors who want to hold gold as an asset.
Gold coins can be a great way to invest in gold, and they can also be a beautiful addition to any coin collection.
Whether you make gold jewelry or invest in coins, this is the only financial asset that has maximum purchasing power.
How To Buy Gold Correctly? A Step-By-Step Guide
Here is a step-by-step guide on how to buy gold correctly:
Do Your Research
Before you even think about buying and investing in gold, it is important to do your research. You need to understand the different precious metals investing options available to you and the pros and cons of each.
Know Your Goals
Before you start investing in gold, get clear on your goals. Are you looking to invest for the long term or the short term? Do you want to invest in gold retirement funds, stocks, gold and silver ETFs, or mutual funds? How much risk are you willing to take?
Consider The Costs
One of the most important things to consider when buying gold is the cost. There are many costs associated with gold investing, including the cost of buying the gold itself, storing it, and insuring it.
Make Your Purchase
Once you have found a reputable dealer, you can make your purchase. You will need to pay for the gold up front, and then it will be delivered to you.
Following these steps will help you buy gold safely and avoid any scams or frauds.
Remember to do your research and know your goals before making any decisions. And always deal with a reputable dealer to ensure a safe and successful transaction.
Choose A Reputable Dealer
When you are ready to buy gold, it is important to choose a reputable dealer. There are many scams and frauds in the gold industry, so you need to be careful who you deal with.Try to deal with the most reputable gold companies.
Best Ways To Invest In Gold
These are the most common ways to get started with investing in gold:
Diversifying retirement portfolios with a precious metals IRA is becoming more and more common.
Stocks, Bonds, Mutual Funds
There's a ton of traditional stock market options to get started gold investing, including stocks, bonds, and funds.
ETFs (Exchange Traded Funds)
Precious Metals ETFs are gaining popularity as a great way to get exposure to a gold index without owning physical gold.
Physical Coins, Jewelry, and Bullion
You can't beat the feeling of physical gold! Whether it's rare coins, jewelry, or bullion bars, lots of investors prefer to own the real deal (and bury it in the yard?).
Speculating With Futures Contracts
You can buy gold futures contracts (typically in 10 - 100 ounce options) through various institutions and bet on the future price of gold.
Mining Companies & Related Industry
Maybe this should fall under the header of "stocks", but another popular way to invest in gold is through the industry surrounding it, including mining companies!
Conclusion - Should You Invest In Gold?
Undoubtedly, gold is a resource that has been used for centuries as a form of investment and currency.
Over time, it has proven to be a stable investment that holds its value even during tough economic times.
If you’re looking for ways to invest your money and protect it from inflation, gold may be the right choice for you.
Next up, take your knowledge a step further with our Guide To Precious Metals Investing, or learn how to add gold to your IRA.