Gold is very trusted and famous throughout the world for its value and rich history, and, logically, people have tended to invest in gold for a very long time. It is now not only one of the oldest investments but also one of the most popular investment options in the world.
What are the best ways to invest in this precious metal? And how can I invest in gold successfully?
The primary use of gold is to make jewelry, but it is also used in electronics, aviation, and medicine. Central banks and governments are the primary holders of gold. America has the largest gold reserves globally, followed by Germany in second place, and the third place is the share of the International Monetary Fund.
On the other hand, individual investors buy gold for the following three reasons:
* Hedging (which is investments that compensate for losses in another asset class).
* haven (which protects investors from economic crises and potential financial disasters).
* Direct investment (investors buy gold to benefit from its price movements in the future).
The best ways to invest in gold
we will review how to invest money in gold as a professional trader through 4 investment options:
1. Coins and bullion
Gold coins and bullion are among the most common ways to store gold for investment. As it is pure gold, entirely or almost completely, it is also trusted according to its mass and degree of purity. Gold coins and bullion are linked to an identification serial number.
Its charming appearance distinguishes heavy gold bullion, but it has some drawbacks, so liquidating it, i.e., converting it to cash, is sometimes tricky. It is also not somewhat indivisible. So, if you want gold bars that are easy to buy and sell, you should choose small or medium sizes.
The investor can buy gold from central banks, and gold is not transferred from them to avoid security risks, but rather through paper contracts. India, China, England, Turkey, and Italy are among the most famous countries globally.
2. Gold Funds (ETFs)
How to invest in gold without actually owning it on the ground? Usually, investors who want to make profits from gold without even storing it invest through exchange-traded funds (ETFs), flexible investment options.
They are comprehensive investment funds for a variety of indices that are based. It tracks the gold sector and gives investors direct exposure to gold prices without owning it. This method is one of the easiest and least expensive, time, and effortless ways to reach the gold market.
3. Stocks of gold mining companies
How do I invest in gold indirectly? Many believe that direct investment in gold does not have the growth potential because an ounce of gold today will always remain an ounce of gold, and this is the reason why several investors have turned to stocks of companies because it includes the possibilities of expansion over time, as investors can benefit from an increase production.
The stocks of gold miners do not necessarily rise or fall in line with the price of gold bullion, but rather move according to the performance of the companies and mines, as the stocks move according to their performance, management, method of operating their funds, and achieving profits.
Therefore investment in the stocks of mining companies is considered High stakes. For example, mines do not always produce the expected quantities of gold, and workers go into strikes sometimes. Natural or even human disasters may lead to a mine collapse or a fatal gas leak and thus stop production and even cost lives.
4. Gold futures
How do I trade in gold as an expert? Futures contracts are the conclusion of an agreement between two parties to buy and deliver certain commodities, such as gold, for example, at a specific time in the future. In fact, the first futures contract was written in 1851 for the commodity of corn, and it was put up on the Chicago Stock Exchange.
Futures contracts are a vital alternative to classic instruments to invest in gold, such as bullion and gold coins. Still, they are a highly indebted and risky option that is not suitable for beginners, but even experienced investors should think a lot before investing in them.
A futures contract is an agreement between a seller and a buyer to exchange a specified amount of gold on a selected future date and price. As the price of gold moves down and up, the value of the contract fluctuates, with the seller and buyer accounts adjusting accordingly.
How is the price of gold affected?
Since gold is subject to the law of supply and demand like any other commodity, it is also subject to price movement and the behavior of speculators and stockbrokers.
In contrast, unlike standard paper currency that is subject to the factor of inflation so that its value and purchasing power erode with time, gold is not affected at all. Inflation, because its value is fixed, and production and mining operations do not significantly affect its price. So investors insulate themselves from inflation by purchasing gold as a store of value and as a safe-haven asset.
Central banks are also the main reason behind the fluctuation of gold prices, mostly when foreign exchange reserves are filled, so the central bank begins to get rid of some gold because it is a non-productive asset and does not generate any return to the economy.
One of the economic issues that must be known is that the relationship between the price of gold and the strength of the US dollar is interesting. The lower the dollar price, the higher the price of gold, and the higher the dollar price, the lower the price of gold.
How do I invest in gold successfully?
If you invest in gold as part of a strategy to diversify your investment portfolio, then ETFs are the best option. Still, if you want to protect your wealth in the event of economic problems or any shocks that may threaten the financial and monetary system in your country or the whole world, then you will need to own gold. Real and not stocks or paper gold.
