Like any and all investments, investing your money and diversifying your risk with bullion can be lucrative, depending on your strategy. The following is a guide to investing in bullion:
A bullion is simply gold (or silver) valued by purity and weight, which differs from other forms of gold, such as jewelry or currency, whose value comes from other factors, including aesthetics. When buying gold bullion, you’re paying only for the market value of the gold plus the minor costs of manufacturing the gold into its current form – its purest form. Bullion often come in bars or coins.
Investment goals
The simple aim of any precious metal investment is to buy when prices are low and sell when prices are high. However, life and the markets are never simple or easy to predict. Precious metals are best regarded as a long-term investment. Bullion tends to move on a different track than equities and other commodities, which makes it very useful hedge against losses in other investment classes.
Ownership of physical bullion
The benefits of owning gold bullion or coins in the long run include:
- Inherited value will increase over time
- Physical gold balances the performance of your portfolios
- Peace of mind against paper stock volatility and bank failures
- Private asset comes with minimal reporting requirements
- Physical gold benefits from nominal spreads
ETF ownership
The ETFs are a type of investment fund typically traded on the stock exchange market. The ETF acts like an open-ended mutual fund where all the money gathered from the entrepreneurs is invested in gold. Advantages of holding gold ETFs include:
- Investing in ETFs means you don’t need to pay charges
- Easier to sell off gold ETFs
- Purchasing ETFs when the currency is weak provides a good support for your portfolio
- ETF constitutes a good short and medium term investment because of their liquidity
- Buying ETFs involves paying a fixed amount, price variations do not affect them
- ETFs are more tax efficient overall
How to sell
It is important to invest with a supplier that has a transparent, liquid market for buying back bullion at favorable rates that do not disadvantage the holder. You will often discover that companies who sell bullion to you, particularly in the case of bars, will discount the market price by only 2% or 2.5% if you bought it from them.
