Unlike a decade ago, most people these days have realised that gold is without a shred of doubt one of the most effective ways through which investors are able to diversify their . Gold is definitely rare and the fact is that the value of the shiny yellow metal does not always move parallel to other financial instruments or assets such as equities or property.
In essence, gold is a sort of insurance for portfolios and the general advice given to people is that they should allocate approximately 5 – 15 % of their entire portfolios to the precious metals or gold-related investments. However, this advice has been floating around on the internet for such a long time, it has become a standard that most people believe works, when the actual truth is, this piece of advice is only half true.
The truthful part or acceptable part pertaining to this advice is that yes, one should allocate 5 – 15 % of their portfolios to gold (best is 15 % or more), but as for now, gold related investments are shaky. Current market conditions, the low price of gold, couple with high operational cost for mining companies have started to pressure mining stocks downwards as most smaller mining companies are looking for mergers or acquisition by bigger companies in order to not go bust, whereas larger companies are flocking to buy up smaller mining companies at low cost and paint a pretty picture on their balance sheets.
ETFs or other ‘paper gold’ formats have become so complex that when one does decide to trace the value stated on the paper, often times they lead nothing but a debtor who borrowed money on the basis that the debtor has gold, most of this gold is borrowed or bought on loan and therefore quite often a kilo of gold is usually owned by 5 or 6 people at the minimum. So, this leaves the question: how can we invest in gold with a guarantee?
The answer for both new and old gold buyers is physical gold, however the type of physical gold that you buy also counts in terms of dollars and sense, for instance buying physical gold in the form jewellery as an investment is not a very good idea, or even gold that have too much premiums added to them such as special edition bullion or P.A.M.P gold which actually reduces your margins quite significantly. Even numismatic coins are not advisable these days.
The best form of gold to invest in is standard good delivery gold bullion bars or coins in small denominations that are above 2 grams but below 10 grams. The reason behind buying smaller denominations is to make liquidation easier, meaning when the time does come when you have to sell your gold; having smaller denominations would allow you to dispose of the gold quickly and easily.
For the present moment this is the best advice on investing gold, the entire financial system has become shadowy and if it is not tangible, it is not trusted, therefore in order to be safe, this is the best approach.
For more information on gold investment options, please visit the Melbourne Gold Company website.