Investing in Precious Metals: Why and How

Investing in Precious Metals: Why and How

Gold and silver coinsGold has long proved to be a favourite amongst investors, and not only as a means of diversifying investment portfolios, which is one of many prominent reasons for investing in gold.

Why?

There are a number of excellent reasons to invest in gold, many of which relate to its effectiveness as a hedge against various uncertainties.

Correlation in price with crude oil – It should be of interest to potential investors to note that gold has shown a long time correlation with the price of crude oil. This trend is most obvious when long term relationships are looked at rather than short term relationships.

Currency devaluations – This could be the case of a deliberate downward adjustment to a country’s official exchange rate, or it could be caused by governments pumping too much money into their economies. Either way, gold as an investment has proven to be an effective hedge against currency devaluations.

Crisis – Gold has long been used as a hedge during crisis, and is often known as the crisis commodity. As an example, in recent times gold has been in demand in response to the European financial crisis. During times of economic, political or social turmoil, many people put their money into gold.

Deflation – The relative purchasing power of gold has been found to soar during times of deflation whilst other prices drop significantly. During such times, essentially times when the economy suffers under the weight of excessive debt, investments in gold really pay off.

Increasing demand – Gold also proves to be an excellent investment because of increasing demand. This demand not only stems from investors, but also from the jewellery sector. It should interest potential investors to note that India accounts for much of the global demand for gold jewellery, and that during the traditional Indian wedding season in October the global demand for gold is at its highest.

Inflation – The cost of gold has the tendency to rise along with the cost of living. For example during the years when inflation in the US was at its highest, the average real return on the Dow Jones Industrial Average was -12.33% whilst the average real return on gold was 130.4%.

How?

Investing in gold is remarkably easy, though before applying for a holding account you are advised to do your homework. By doing your homework and gaining an adequate understanding of how gold trading works, the factors that affect gold prices and how to store the gold you invest in, you can help to mitigate the risks.

Once you have done your homework and you have decided that gold is the right investment for you – as with all investments it is essential that you come to this conclusion – then you should get in contact with a gold broker like GoldMoney UK in order to discuss your options and to see what services they have to offer you.

Trading in gold is incredibly simple once you have found the right platform through the right broker, and can be as simple as:

  1. Applying for a holding account and logging in once approved
  2. Select your currency and ‘gold’, or the precious metal you want to buy
  3. Select the amount of gold, either by weight or money
  4. Review your order and complete your transaction
  5. Receive confirmation and check your holding account’s new balance

That is how simple trading in gold as an investment is, and you might also be surprised to note that you can also invest in gold through your SIPP (Self-Invested Pension Fund), moreover, there are some excellent reasons for investing in gold for your retirement.

 

About the Author:

Marlys K. Ferguson is a freelance writer from GoldMoney UK, a company that aims to give clients the opportunity to deal gold, silver, and other precious metals in a safe and secure manner.