Investing In Gold

Historically investors have used gold as a means of storing their wealth during volatile economic times. It’s a form of investment that attracts risk-averse people. To cater for the most wary investors, gold storage companies sometimes go as far as offering storage spread amongst foreign underground vaults to guard against the possibility of a city being destroyed by war or natural disaster.

With the world economy in turmoil following the credit crunch in 2008, gold became an attractive investment for many and prices soared. This attracted a lot of short-term speculative investors to the market, some of whom were stung when the price started to drop towards the end of 2012.

There is currently a mixture of opinion amongst experts about whether gold represents a good investment or not. Those who expect the world’s major economies to grow will be looking to invest in shares and commodities whose prices are driven by economic growth rather than gold. People who expect the economy to remain stagnant for a while longer see gold as a safe investment in the meantime.

Financial advisers often encourage their clients to hold part of their portfolio in gold as a hedge against falls in stocks and commodities. Here are some of the main approaches to investing in gold:

1 – Exchange Traded Funds: These can be bought from any stock broker and are the easiest way for an investor to enter the gold market. They consist of two main types – physical funds, which are backed by real gold, and synthetic funds, which are set up to mimic the price of gold. Many experts warn investors against investing in synthetic funds unless they understand precisely how the funds work in practice.

2 – Physical gold: The main forms of gold available for investors to purchase are bullion and coins. Buying these necessitates the arrangement of some form of storage, something that can be expensive. There are recently established online companies that will allow you to buy a share of gold stored in their vault.

3 – Shares in gold miners: The value of shares in mining companies lagged behind gold prices when they were increasing and fell further when gold was in decline. Some now see this as a value investment, although it should be noted that investing in miners rather than the metal itself involves additional risks related to the operation of these companies.