Buying Gold Investment

There are three traditional ways of buying gold today. 

"Bright and yellow, hard and cold. Molten, graven, hammered and rolled. Heavy to get and light to hold. Hoarded, bartered, bought and sold. Stolen, borrowed, squandered, doled. Spurned by young, but hung by old. Price of many a crime untold. Gold! Gold! Gold! Gold!"

Thomas Hood. 1799-1845

1. Physical Gold

Physical gold investments are the simplest way to Invest in Gold. Physical gold includes Krugerrand, ingots, gold bars, gold coins,  manufactured new gold Jewelry or old gold Jewelry  from the secondary market that doesn't cost the earth.

Gold Jewelry  should be viewed  as a long-term investment  as the  price of gold, historical and invariably increases in value over the long term.  When you buy gold as an investment, buy at the lowest possible price.  Location, location, location is part of the gold buying investment equation.  The  Dubai gold market, for instance, is renowned for really cheap gold prices, because labor costs are relatively low.

Buying gold bullion  does have it's storage considerations.   Although  gold ingots, also called gold bars may  not be as big as many people might think, the buyer must consider  how and where  to store it. 

Buying antique and estate gold jewelry  as an investment is one way of getting around this problem. I mean, how many people do you know that don't like wearing  Jewelry?  Storing physical gold at a bank, for example,  involves certain liabilities and also expenses, that include the cost of storing gold bars in bank deposit boxes and vaults.

Another  problem with buying  gold  in this form, is that many gold buyers who buy gold investments in this manner,  do so believing that it is the one asset which is no-one else's liability. Wrong! Wrong! Wrong!

There is a nasty legal subtlety which causes some gold buyers to hold onto gold in such a way that achieves the exact opposite.  Exposing themselves to a hidden risk,  the same risk they were trying to avoid in the first place.

Take a look at the Gold Facts.

Common sense dictates that money can't belong to a saver and his bank at the same time. It's a well-established law that money deposited in a bank becomes the bank's property and its liability.

Simultaneously it stops being the saver's property and becomes the saver's asset. This means that if a bank fails, the saver must stand in-line with the other creditors and maybe accept a few cents on the dollar.  Although governments in some countries do offer depositor protection, which might reduce the loss.

In the current economic global meltdown, it's well worth knowing that there's a critical difference in how gold buyers are perceived and treated as Account Holders.

The two types of account holders are CUSTODY and ACCOUNT. They have similar-sounding names in the gold market. In the gold market, these treatments are called ALLOCATED and UNALLOCATED storage. 

2. Gold Contracts

Paper gold contracts where the price is fixed to the price of gold is another way to invest in gold. Gold contracts track the gold prices but you do not take physical ownership of the gold.

3. Gold Shares

Includes adding gold-mining companies to your share portfolio. This type of buying gold involves buying shares in a gold mining company or companies. This kind of gold investing is quite complicated.  You have to keep an eagle eye on the gold price. 

For example, some gold mining companies may have excellent gold reserves or gold and mineral reserves but may not be managed very well. Or on the other hand, the gold mining company may be very well managed but not have good gold reserves. 

Buying Gold Investment Tips

  1. Gold is held in bullion form by banks. Banks use physical gold as an instrument of currency for covering losses and moving their currency around. For example, if the currency is weakening, the banks may be selling their gold off.
  2. The price of gold is "fixed" daily and can move in unexpected directions.
  3. Remember gold is a long term savings asset and day to day gold prices are volatile don't panic and don't sell just because the price might fall in the short term.
  4. Old Gold Jewelry is physical gold investment.  

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