Anyone who wants to invest in the precious metal gold is spoiled for choice. In addition to buying gold bars and gold coins, investors can also benefit from rising gold prices through indirect investments. But what kind of investment is worth the most?
• Gold as an investment for uncertain times
• Indirect investment opportunities
• Gold bars or gold coins?
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Gold investment in mind
Gold has a long history as a store of value. Numerous investors swear by an investment in gold as a hedge in economically uncertain times, such as high inflation rates. The yellow precious metal has increased in value over time, but the limited availability of the raw material prevents the risk of excessive supply and the associated losses in value.
In addition, gold is a popular means of diversification because it often does not correlate strongly with other assets such as stocks or bonds. In this way, the metal can possibly cushion losses, for example due to price reductions on the stock market. In addition, trading in gold offers the advantage that it can be done worldwide and the raw material can be exchanged for cash comparatively easily.
Gold ETFs, Gold ETCs and Gold Mining Stocks
Investors who want to invest in gold have various options for getting started trading in the yellow precious metal. Indirect participation opportunities include investments in gold ETFs or gold ETCs. Gold ETFs (Exchange Traded Funds) are exchange-traded funds that track the price of gold. The issuer uses the fund assets to purchase gold bars and stores them with banks. ETCs (Exchange Traded Commodities) are exchange-traded commodities that also track price developments – in this case gold – but unlike ETFs, these are legally perpetual debentures. Should the issuer of the ETC become insolvent, the underlying investments will be subject to bankruptcy proceedings. In addition, exposure to shares in mining companies or operators of gold mines is also possible. Some of the best-known gold mining stocks include Newmont Mining, Barrick Gold, and Newcrest Mining.
Physical gold can be sold faster
But a direct investment in gold is also possible, for example by buying gold bars and gold coins. The main advantage compared to ETFs, ETCs and gold shares: Physical gold can be liquidated much faster. In addition, securities traded on the stock market could suffer from general market weaknesses, although these may not affect the price of gold at all. Compared to an exposure to shares, however, there are no dividend payments with physical gold.
Gold bars easier to manufacture
But which form of physical gold is more worthwhile: gold bars of gold coins? This strongly depends on the individual goal of the investment. As the “Volksbanken Raiffeisenbanken” explain in an article, gold bars are much easier to produce than coins. This also results in lower processing costs that are normally priced into the end products. Therefore, the bar price is closer to the actual price of gold.
Gold bars are also available in different weight gradations: Stamped bars are sold in sizes between 1 and 100 grams, cast bars up to a weight of 1,000 grams. Smaller divisions have the advantage that parts of the stock can be sold more easily than large gold bars.
Small denominations of gold coins
The smaller denomination is also one of the advantages of gold coins. Common sizes are loud “t-online“One, half, one quarter, one tenth, one twentieth and one twenty-fifth troy ounce. One troy ounce of the yellow precious metal corresponds to 31.103477 grams. There are some well-known and reputable mints here, including Krugerrand, Maple Leaf, Australian Nugget and Wiener Philharmoniker, according to the VR banks. As already mentioned, the minting of coins is usually associated with higher production costs than gold bars. Visually appealing motifs also offer – in addition to the gold value – a collector’s value that can also serve as an investment.
Denomination should not be too small
Martin Siegel, managing director of the precious metal dealer Westgold, recommends to the “Süddeutsche Zeitung” to refrain from denominations that are too small, since the unit costs are lower for whole ounces. “Experience has shown that the trading range for the Krugerrand is around three percent for the 1-ounce coin, and ten percent for a quarter-ounce,” says the expert. According to Siegel, it is also not necessary to think about the future distribution of the gold holdings, for example to heirs, and therefore to choose a smaller denomination. Regardless of the denomination, gold can be sold quickly and easily in the event of an inheritance and the profit can then be distributed among the heirs.
Additional costs
According to “CBS News”, it should also be noted that trading in gold can entail additional costs. Transaction fees can increase the purchase price, but costs for insurance and storage of the metal should also be taken into account. Small amounts can be stored in a safe at home, for example, according to the news broadcaster, while larger stocks have to be found in an external warehouse.
Beware of dubious providers
Another pitfall of investing in physical gold is that there are also some black sheep in gold trading. Investors should only work with traders who have positive reviews, CBS News advises. So investors should think in advance about what kind of gold bars or gold coins are interesting for them and research their usual market prices. This makes it possible to determine whether the retailer’s price is too high. But also prices that are too low or promises of unrealistically high profits should make interested parties prick up their ears. This is often an indication of fraudulent intentions on the part of the gold providers.
When buying gold on the Internet, according to t-online, it is also common to pay in advance. If the online retailer turns out to be a fraud, you have to reckon with a loss of money.
Individual investment decision
In summary, how investors should invest in gold depends heavily on individual goals and needs. According to CBS News, physical gold is a good choice for beginners because buying bars and coins feels more tangible when storing them at home. However, if one is not interested in the possibility of a quick sale, buying gold ETFs, ETCs or stocks could also be worth considering.
Editorial office finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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