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Precious metals have been part of savings and investment strategies for centuries. Metals are stable, fire-resistant, portable, and likely to retain their value for centuries to come. Gold has historically been among the most valued metals.
Other metals may fetch a higher price per ounce than gold, but gold has captured the human imagination for thousands of years. People are more likely to put their money in gold and silver in volatile economic times when other investment vehicles like savings accounts, stocks, and real estate are unstable.
Why Do People Invest in Gold?
With an investment in gold, you don’t have to worry about tracking the stock market every day. Gold is likely to maintain its value in the event of an economic downturn or collapse because people turn to trusted assets in times of crisis.
People can invest mainly in gold because they anticipate an increase in the value of gold over time. This could be the result of inflation, economic instability, or simply the supply not keeping up with the needs of a growing population.
A more conservative investment strategy might include gold as part of a larger portfolio as a hedge against an economic downturn. Other investors might invest in gold as a short-term strategy, hoping to capitalize on volatility in the price of gold.
Is Gold a Good Investment?
Precious metals, including gold, have several advantages and disadvantages relative to other investment vehicles. Consider the advantages first.
Limited Supply
There is a limited amount of gold in the world and an increasing population. Unless there is a decrease in world demand, a new discovery of vast quantities of gold underground, or an asteroid strike that carries gold from outer space, gold is all but assured to increase in value over time.
Inherent Value
The value of gold is not tied to any particular company or institution, so it will never completely lose its value.
Unlike stocks, gold is not likely to drop precipitously. If a company fails due to catastrophic news about the company, as happened to Enron in late 2001, investors can lose nearly all of their investment value.
Ease of Liquidation
Gold can be bought and sold relatively quickly compared to real estate and property investments. A house or condo, for example, retains some value as a physical structure even when the market falls. However, it can take years to sell a property, and it is essentially impossible to move a property to a safe location in the event of a natural disaster.
General Rise in Value
Gold has shown a generally upward trajectory in value from under $50 in the early 1970s to a high of over $2,000 in 2020. The ability of gold to retain its value when currencies devalue makes it an effective inflation hedge. For instance, someone who bought gold at the 1970 low price of $35 and sold it at the 1980 high of $843 would receive a nearly 2400% return on their investment.
Disadvantages of Owning Gold
A buy-and-hold strategy for gold is unlikely to produce large gains unless inflation rates are high. Buying stock in a company or buying property in an up-and-coming neighborhood can generate revenue because people buy the company’s services or rent the building. Gold just sits in a vault.
Investors who want to outpace inflation and see large gains often prefer to invest in gold industry stocks, like stocks in a mining company, or to take the riskier step of investing in gold futures.
The best investment plan in gold will mitigate the disadvantages while retaining gold’s core benefits.
Gold Versus Silver
Gold and silver are both precious metals and useful inflation hedges. The metals have different industrial uses and are distributed differently around the world. The principles of supply and demand can affect different metals differently.
Ways To Invest in Gold
Gold investors have many options. Here are a few:
Owning Physical Gold
Perhaps the most direct, if not the most straightforward, approach to gold investment is to buy physical gold bullion. Many countries produce gold coins. At present, there is no restriction on the ability of U.S. citizens to own gold.
The downsides of owning physical gold are the cost of storing and protecting it and the time and effort required to sell physical stocks of gold.
Investing in Mining Operations
Investing in the mining and processing of gold combines the risks and benefits of gold investment and equities investments. Any individual gold mining company can fail, causing loss of stock value, or strike new veins, yielding higher profits than the value of gold itself. When the economy is inflationary, investors will usually flock to gold, raising the value of your mining stocks.
Gold Mutual Funds
Mutual funds are investments that distribute your money across many stocks. In some cases, fund managers charge a percentage of the share value when you buy shares. Mutual funds are not dependent on any one stock’s performance, so they tend to be less volatile than other investments in the stock market.
Some mutual funds specialize in the gold industry.
Exchange-Traded Funds
Some mutual funds are tied to the value of a particular commodity. These are called exchange-traded funds (ETFs). Buying shares in a gold ETF allows you to invest in the gold market without having to store and transport physical gold.
Gold Futures
Investing in futures is a strategy that offers higher risks with the prospect of greater rewards. A futures contract is essentially an agreement to buy or sell a commodity at a future date at an agreed-upon price. If the commodity rises or falls during that time, the investor could make money on the eventual contract or take a loss.
What makes futures so sensitive to volatility is that many traders only pay a fraction of the value of the goods themselves. This is called buying on margin, and it multiplies the return on investment or loss. While many investors choose gold as a safe haven from volatility, futures trading in gold or any other precious metal can accentuate the effects of volatility.
For instance, an investor might only pay $100 to invest in a futures contract for $1000 in gold. If the gold goes up 10% by the time the futures contract matures, the gold the investor bought is worth $1100, and they can sell it for $100 in profit. On the other hand, if the price of gold goes down so that the gold is now worth $850, the investor loses the entire investment and owes an additional $50.
Gold and Silver IRA Funds
Individual Retirement Accounts (IRAs) are retirement accounts that are exempt from certain taxes. There are limits on how much money you can put into an account and when you can take money out. You can buy shares in a new fund or roll your existing IRA into a new gold fund.
There are many different kinds of retirement accounts. For more information, see the explanation of the most common fund types here.
Investing in Gold and Silver IRA Funds
The process for investing is simple but be aware that not all investments maintain their value and that past performance does not guarantee future results.
First, read the prospectus or investment guide carefully and make sure you understand the makeup of the fund, the value of any commissions charged by fund managers, and the nature of the type of fund you are investing in.
Second, fill out the application form, either as a paper copy or online. Double-check the application, including the type of shares you are purchasing.
Next, wire the funds to put money in your precious metal IRA account. Once the Oxford Gold Group receives the money, choose which precious metals you would like to invest in. They will then ship the metals to a secure and insured storage facility.
Investing With the Oxford Gold Group
Are you looking for the best investment plan in gold? Look no further than the Oxford Gold Group. The mission of the Oxford Gold Group is to provide the best service and quality gold and precious metal products for our investors while keeping commissions and fees low.
The Oxford Gold Group sells coins and bars in gold, silver, platinum, palladium, and other precious metals. We understand both the economic and the practical side of precious metal investing.
Among our most popular products are the Gold and Silver IRA accounts. They allow investors to gain the tax benefits of a retirement plan while having the peace of mind and security of investing in precious metals.
We provide state-of-the-art facilities for precious metal storage, and we handle all the paperwork for you. All you have to do is set up an account, transfer funds, and select your metals. To learn more, read our investment guide today.
If our investment guide and How to Invest in a Gold IRA guide have not answered your questions, learn more about investing with the Oxford Gold Group and call (833) 600 – GOLD today.
