Gold is a popular investment asset, and like many assets it has grown increasingly popular since the interest rates offered by banks headed towards the floor. Gold is considered a relatively stable asset which generally rises in value over time. It is usually not a short-term investment, but many investors have had good results using gold as a medium- or long-term investment and it has a millennia-long history of strong global demand.
However, every asset has its quirks and an element of risk. As with all investments, gold should be approached with care and careful consideration.
How to Invest
There is more than one way to invest in gold. Obviously, one is simply to buy gold. This will usually take the form of special gold bullion such as bars or coins from the royal mint. However, it can take the form of any sort of gold including jewellery, but bear in mind the value will be seriously affected by purity as the majority of jewellery is not pure, 24k gold.
The main alternative is to invest in gold mining companies or other companies that deal mainly in gold. These companies, and therefore their share values, will naturally be tied fairly closely to the price of gold so when the gold price goes up you can expect to benefit. Most of these companies also have interests in other diverse metals and possibly other areas entirely, adding some automatic diversity to your investment. However, this avenue is also vulnerable to other factors that might affect the success of the individual business.
Don’t think that the Royal Mint is the only place to buy bullion coins, for instance. They may be the producers of those coins, but there are other companies that purchase the bullion produced by the royal mint wholesale and sell it at discounted prices. The main thing is to ensure you are dealing with a respectable seller. Furthermore, this bullion can be picked up second hand, and the base value of this older gold is just the same as that of new gold.
If you want to try and pick up cheap gold through buying second hand, broken or scrap jewellery then there are countless places you may choose to look. However, make sure you check hallmarks properly and know you are paying a good price for the actual gold content of the item – which can be a labour-intensive process.
Beware the Pitfalls
Like any asset, gold has its pitfalls. It does not provide any liquid income while you still hold the investment, and it can be difficult to resell quickly. It can also be difficult to store, and if you invest in a reasonable quantity should not be kept at home as it will probably fall outside of your home insurance.
It is also easy for beginners to get caught out by the many products which are barely more than scams. Ebay, in particular, is a minefield of questionable sellers peddling these kinds of products. They look like legitimate gold bars or coins and are sold as investment products, but are only gold plated and are almost worthless. To avoid breaking the law the seller will mention this, but they will avoid saying “plated” and instead use obscure or invented synonyms such as “layered with gold” to try and hide the fact and trap unwary investors into thinking they are buying something more worthwhile.