There are some investments that stand out and repeat over time: investing in gold, silver and precious metals in general is one of them. The gold rush is not new, in fact it is not even from this century. Think of how the Spanish conquistadors failed in their search for El Dorado. But is it profitable to invest in gold today? Why and how to invest in gold? We will clear up all your doubts!
Why invest in gold and silver?
There are many reasons to buy gold and silver, but one of the most common is its perceived safety. This metal acts as a haven in times of crisis, as the price of gold tends to be more stable than that of other financial assets.
This does not mean that gold cannot fall, on the contrary: it all depends on when you started investing. What is happening is that its value has risen over the long term. Part of the reason for this is that gold is closely linked to the price of the dollar, so when the dollar suffers, gold rises and vice versa. Something similar happens with inflation. As money in circulation increases, so does gold, but with a 6-9 month lag.
In addition to its value as an investment and a safe haven, gold is used in jewelry and electronics, creating a constant demand for the metal. As a finite commodity, this means that its price tends to rise.
Pros and cons of investing in gold
Investing in gold and silver can be a good way to cover risks, but this does not mean that it is not without its positive and negative points.
Positive points of investing in gold
One of the advantages of investing in gold is its stability, although there are others:
◾ Saving in physical gold gives you an asset with total liquidity. You can sell it at any time anywhere in the world. It is the closest thing you can get to physical money. Of course the selling price of gold may not always be the buying price.
◾ Gold is not subject to political uncertainty.
◾ Allows you to diversify your investment portfolio.
◾ A small amount can have significant value which is easy to store in the case of physical gold.
These are the advantages of investing in gold that have made it a safe haven asset and one of the first alternatives that savers look at when they think about the safety of their money.
Negative points of investing in gold
It is not all good, there are also dangers or drawbacks to investing in gold that we should be aware of:
The investment is not guaranteed. You should not be guided by words such as ‘safety value’ and the like. The value of gold can go up and down and you have to take that into account.
It has a high correlation with the dollar, so when the value of gold falls, the dollar rises.
This is particularly true of physical gold, which may also require insurance.
How to invest in gold
The most common way to think about investing in this precious metal is to buy bullion or some other form of physical gold. The reality is that there are other alternatives to investing in gold and silver that have nothing to do with the physical acquisition of the material.
Each option has its pros and cons. The most important thing is to understand how they work and what we get in each case. If you want to know how to invest in gold in Spain, in the following lines you will see the options for buying this precious metal.
How to buy gold with financial products
In addition to investing in physical gold, there is the possibility of buying the precious metal or silver through various financial products. In this case, the commodity is usually an underlying asset to be invested in.
These are the alternatives to investing in gold with financial products.
Investing in gold ETFs
Gold ETFs have become an alternative to physical gold for short-term investors. Gold ETFs attempt to track the behavior of gold in the commodities market. It is the most reliable ways to invest in gold without buying the metal.
These are some ways to invest in gold with ETFs: Market Vectors Gold Miners Index ETF, iSHares Gold Trust. Here are some ETFs in the RV Sector Gold and Precious Metals category.
Gold investment funds
Gold funds invest in gold and everything related to it. To give you a better understanding, the fund manager will buy mining stocks and other companies involved in gold mining, may invest in exchange-traded funds (ETFs) and other derivatives, and generally will be more or less related to the price of gold, but won’t replicate it directly.
In reality, it is a more diversified alternative to direct investment in gold, although it all depends on the objective being pursued. And these gold investment funds do not have the safe-haven profile that physical gold theoretically offers.
One option is the Jupiter Gold & Silver Trust, a product for those who want direct exposure to gold and silver, as well as mining companies. This investment vehicle invests in equities of companies engaged in activities related to the exploration, development and production of gold and silver.
How to buy physical gold
From silver bars to gold coins to 24 carat gold jewelry, 18 carat gold… There is a whole world in the physical gold market.
Each of these ways of saving in physical gold has its own characteristics. This is a brief summary:
Gold coins
The value in this case is twofold. On the one hand, the value of the gold used to make the coin is increased (in this case, the percentage of metal is decisive) and, on the other hand, the numismatic value of the coin is increased. At this point, no currency is better or safer than another. From the American Eagle to the Napoleon or the South African Krugerrand, it’s all about choosing the one you like best.
Each coin has its own value and price, based on the percentage of gold it contains and what the gold coin collector’s market will bear.
Jewelry
Investing in gold jewelry is a similar alternative to numismatics. The big problem with jewelry is that its value is not always directly proportional to its gold content. It also depends on the proportion and quality of the metal used. 24 carat gold is not the same as 18 carat gold.
The good thing about jewelry is that you can always downgrade from gold to silver if the former is too expensive. What’s more, you can do the same with any investment to save on physical gold.
Physical Gold with Gold and Silver Bars
This is the most common option in this section, and to some extent the most recommended. It basically consists of buying a bar of gold or silver to store and sell when the time comes.
The big problem with investing in physical gold is storage, especially when we are talking about bars. And depending on the piece (it usually weighs 31.1034768 grams), its value will exceed 6,000 euros for the gold bar and 250 euros for the cheaper silver bar. If you had that kind of money at home, you’d probably hide it well and not keep it all in one place. You should do the same with gold and silver bars.
To solve this problem, platforms such as Lingoro, Ciode or IGR Spain have emerged to take care of the whole process. That is, buy the bars, store them and sell them when the time comes. In this case we would own physical gold, you just wouldn’t have it at home or in your bank safe-deposit box. Advantages of investing in physical gold is that investment gold is exempt from VAT. This applies to bullion which, as an investment, is not subject to VAT, nor is an investment fund, ETF or other financial instrument. This exemption does not apply, for example, to the purchase of gold coins or silver and gold jewelry. These products will be taxed with the corresponding VAT of 21% or with the property transfer tax if they are purchased on the second-hand market.
