In 5 minutes, at the end of this article, you will have a much clearer idea about the opportunity of buying gold as an investment.
I have added a section explaining how to find cheap gold, in which countries to spot it and whether it is worthwhile or not.
I will show you all the options available to you to buy investment gold: bars, mines, coins, funds, ETFs, ETCs and paper gold.
Should I invest in gold? Is it worth it?
Let’s find out!
Table of Contents
Here is the list of methods to buy gold as an investment in 2021:
- Physical gold bars
- Allocated physical gold
- Authorized online gold dealers
- Gold shops
- Gold ETFs or gold funds
- Mining stocks
- Gold futures
- Gold coins
- Gold jewellery
- Gold auctions
Be careful with gold!
As you can see, there are many ways to invest in gold.
Physical gold, digital gold, paper gold and hybrid ways.
Beware that the price of gold is subject to major fluctuations; it is not as fixed and permanently rising as you might think. If you think the volatility of gold might cause you anxiety, think twice before investing.
Investing in gold involves risk, although it is true that its value can never be zero. It makes sense to invest long term and include gold in some ways.
Should you buy gold as an investment?
Who should buy gold to invest?
Is it worth to invest in Gold?
Let’s start with the goal.
Generally there are two goal:
- Investing in gold for the long term, i.e. buying gold to hold for years.
- Speculating on the price of gold, i.e. trying to sell it back soon at a higher price to make a quick profit.
Either way, it makes more sense to invest in gold if you already have a decent diversified portfolio of other investments.
Gold cannot be my only investment. Never.
A small investor may well prefer other forms of investment that generate returns, instead of betting everything on gold.
Those who only today discover that they have invested too much money in gold might start to look at other forms of investment.
Perhaps alternative high-yield investments or timeless real estate.
Here is the list of the best investment ever.
Gold as an investment: Pros and cons
The reasons why investors buy investment gold are:
- It protects against inflation (maybe)It increases in value if the stock market drops (theoretically)
- It is used to diversify and protect the global portfolio
- It is a finite resource
- It can never be worth zero
BUT many other investors do NOT think so and argue that gold:
- You need to know where to put it (if physical)
- Can be expensive because of fees
- “spread” between purchase and sale prices can be high
- It has no yield and no dividends
- It is not certain that it will always increase in value over time
These are the most common pros and cons when investing in gold, but let’s not get carried away.
As always, the truth lies somewhere in between. Let’s see why.
Historically, the world’s largest investors and portfolio managers recommend that gold should take between 5% and 15% of total investments.
My take on this is that it first considers the size of the portfolio.
A small investment portfolio does not need gold.
Ways to invest in gold
There are mainly two ways to invest in gold:
- digital gold (financial)
- physical gold
If I want “financial” gold I can ask:
To buy physical gold I can turn to:
- Street gold shops
- Gold dealers
- Companies that sell allocated gold (like BullionVault)
How to buy financial gold?
To invest in gold, most investors avoid physical metal.
Convenience and efficiency, people prefer to buy gold indirectly, through financial instruments.
The methods for investing in financial gold are as follows:
- ETFs / ETCs
The cheapest method is usually represented by ETFs that reflect the price of gold or have gold “inside”.
I mention ETFs for the sake of convenience, but under European law ETFs with only one product (gold) are ETCs.
Let’s move on.
Benefits of using ETFs to buy investment gold:
- low minimum amount
For these reasons I believe that for a small investor ETFs are the simplest method to buy gold.
📌 Which are the best gold ETFs
I don’t like to write something that sounds like an investment recommendation. But at the end of the article I want to leave you with something to do, not just ideas. That is why I mention some stocks and some brokers, but the decision is yours.
This list of ETFs is a simplified list of instruments to invest in gold:
- iShares Physical Gold ETC (one of the largest)
- Gold Bullion Securities ETF (the oldest)
- WisdomTree Physical Gold
- Xtrackers Physical Gold EUR Hedged ETC (physical gold replica)
Which tools should I use to buy gold ETFs?
OK, these are the ETFs, but if I want them, where do I buy them?
Any broker will do.
I’d say Degiro and eToro in Europe are both good options.
Degiro is cheap and eToro (if I invest in ETFs) is totally free.
Notes: “Investing involves risk. You can lose some or all of the amount of your deposit.” 75% of retail investor accounts lose money trading CFDs.
How to buy physical gold?
It is fascinating to own physical gold. To be able to touch a bar and appreciate its weight and glitter.
But where do you buy physical gold?
Where can you get cheap gold?
Now let’s talk about gold bars, gold coins and even jewellery.
Anyone who is serious about investing in gold will focus on gold bars.
An investment gold bar has a purity of over 99.5%, or 24 carats. To be clear, jewellery gold is “only” 18 carats, so it also contains other metals.
What to check before buying a gold bar?
If I am not able to answer these questions I’d better not buy anything:
- Is the weight guaranteed?
- Does it have its certificate along?
- Is the producer/seller reliable?
- Is the purity close to 24 carats?
- Is the price I am about to pay very close to “spot gold price”, i.e. the current standard world price of gold?
- Have I thought carefully about where to store it?
The last point is crucial – don’t overlook it.
Keeping gold at home is potentially dangerous. Gold could be stolen even if you keep it in a safe.
The price of the safe has to be considered, and the price of a bank safe has to be taken into account too.
So, only if I have all the answers then I’m ready to make no mistake about buying my first investment bar.
Note well that an ingot without a certificate does not make sense to buy it and also the risk of buying a fake ingot exists.
Here is a video fake gold on youtube:
Fake bars can also be lead-filled but plated with pure gold.
How to buy gold coins?
Gold coins are a curious way to invest.
They have a value that goes hand in hand with the prestige of the coin itself, and the gold that makes them up may not always be very pure. Gold coins are smaller and are more flexible than a large bar.
The price per gram is usually higher, but gold coins are beautiful.
When it comes to coins we find so many different types.
I will avoid those with numismatic value.
Because if I am not an expert the chance of getting the wrong one are very high.
The most popular gold coins are these:
South African Krugerrand and the Canadian Maple leaf.
BullionVault and BullionbyPost do sell it.
Is it worth to invest in Gold coins?
It depends. If you know how to do it, yes. Just don’t buy gold coins only because they look nice.
How much gold to buy?
How much of my portfolio should be allocated to gold and precious metals?
I try to answer but it is difficult.
Unfortunately, there is no perfect percentage of gold for everyone. Gold, silver and precious metals can add “peace of mind” to a portfolio, but this comes at a cost.
I’m going to tell an uncomfortable truth here….
Many investors will probably buy gold in order to protect themselves against events that will never happen.
This comes at a cost.
The tragic scenarios that gold could protect us from are:
- Total war
- crumble of entire institutions
- very high inflation
- currency collapse
These events are remote but possible, so what am I willing to give up to be “safe”?
In short, if I buy gold, I give up other more profitable assets in exchange for peace of mind. What kind of risk tolerance do I have? The greater the fear, the greater the amount of gold.
Between 5% and 15% is considered reasonable by most financial advisors. If you have something above 15% you are either doing something very wrong or you are paranoid. If in doubt, do nothing or consult a financial advisor.
Videos to invest in gold YouTube
This is the best YouTube video on gold investing I’ve found so far:
Where to find cheap gold?
There are countries where gold seems to cost less than in your country.
So, where to buy cheap gold?
Who among us has not been stunned to see how cheap gold on sale in India or in Dubai?
Buying gold in Dubai or India seems very convenient.
Unfortunately it costs less because it is not 100% gold. You may have noticed that the colour of gold in the Dubai market is reddish. It contains high amounts of copper and other metals that are NOT gold.
If gold is not 99,5% pure or more, it is not suitable for investment purposes.
One way to get cheap gold a few decades ago was to go to the source, near the mines.
Today, it would not be advisable to fly to Africa and try to get into trouble ti buy (possibly counterfeit) gold.
Still want to go? Ghana, Venezuela and South Africa are the hot spots.
Historical gold price
We always reason in US dollars when talking about historical gold prices, not in euros.
Let’s see how gold prices have evolved in recent years.
First fact: in the last twenty years gold has risen a lot.
During the 2008/2009 crisis, the price of gold per ounce exploded from $700 to $1,000 per ounce while the financial world was sinking in the subprime mortgage crisis.
Shortly afterwards, in 2011, then in the midst of the post-crisis recession, gold did not stop rising and touched almost USD 1900.
Today we are back at that level again after the coronavirus crisis caused gold to touch 2000 USD.
So gold always goes up?
Not at all!
Since the late 70’s gold has spent 20 years going down/up, so some experts predict that after the recent upward shootings a slow descent of gold can be expected.
To make a serious assessment one would need to remove the devaluation of the US dollar from the calculation. In absolute terms the highest value of gold was in 1980 while hyper-inflation was scourging the world.
Correlation between stock market performance and gold
How nice it would be to know that if the stock markets fall, gold immediately goes up, right?
Let’s see if this has always been the case over the last 100 years.
Knowing the effect of market falls on the value of gold helps you make objective investment decisions. It helps to make money or not to lose money.
It is a rather widespread belief that claims that the prices of gold (and precious metals in general) maintain and increase in price during financial crises.
However, if we analyse the data of the last decades, we see a relationship, but not as clear-cut as we would like.
Typically, stock markets have a negative correlation with the US dollar.
Gold, on the other hand, has the opposite relationship. The US dollar tends to rise when markets fall, which causes a downward trend in the price of gold (which is in dollars). This causes, especially in the early stages of crises, gold and markets to move in strange synchrony instead of in the opposite direction. This probably happened at the beginning of the crisis in 2008, when gold and stock markets fell together for a while.
Conclusion: gold and stock markets are rather decorrelated, but beware of the early stages of crashes where we expect synchronicity that may not come immediately (leading us to make a investing mistakes).
Only investing in gold in the very long term you have a discreet probability to make profit at the moment of the sale.
In reality, however, gold is used only to diversify portfolios and cushion the shocks of financial markets. In some cases it has been useful to protect against inflation.
The easiest way to hold gold is NOT to have physical gold hidden under your mattress.
Those who invest in gold prefer financial instruments such as ETFs or perhaps companies that keep it safe for us.
A short list of ways to invest in gold (better to worst:
- Buying gold ETFs
- Investing through big companies that have gold allocated
- Keeping gold bars in a safe deposit box
Thinking that buying silver or platinum is equivalent to investing in gold is a mistake. Those metals often follow different patterns.
So, should you buy gold as an investment? I think you have more data than 5 minutes ago to make an informed choice.
Now it’s your turn!
What do you think? Do you invest in gold?
If you keep gold at home can you tell us where you hide it?
What are you thinking of doing now, get more information about physical gold or gold ETFs?
So, is it worth to invest in Gold for you?
Around 55.000 USD
You can buy gold online through a broker, at a bullion exchange and at some banks
The price of pure gold is unique all over the world.
Yet you can find cheap gold in India, in Sharm el Sheik, in Dubai, but it won’t necessarily be pure. How do I recognise pure gold?
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