This article from Oxford Gold Group demonstrates common concerns investors may have when thinking of a precious metals purchase. Here you can find some valuable resources from the company to help further your knowledge.
For centuries, gold has been a valuable commodity. Not only is it a beautiful substance, but it has incredible durability that makes it a good material. From delicate jewelry to dental crowns, gold is a highly versatile substance with endless potential.
These days, individuals consider buying gold for various reasons, whether sentimental or part of a complex investment strategy. Although gold has unmatched and long-lasting value, many buyers have several common concerns about buying gold. This is partly because investing in gold is complicated, with multiple factors to consider.
Thankfully, there are multiple ways individuals can invest in this precious metal. Whether buying a gold brick or investing in gold mining company stocks, buying gold offers impressive return on investment, or ROI, potential. However, investors must research and consider various factors before moving forward with a gold investment.
Buying gold has the potential to be a worthwhile investment with many benefits. Below are some of the most common concerns about buying gold that individuals should consider before investing in it.
Is Gold a Valuable Investment?
One of the most common concerns about buying gold is whether or not it is a valuable investment. Many investors look to diversify their portfolios with various investments ranging from shares in the stock market to property investments. The primary concern for any investor is whether or not their investment funds will see a significant enough ROI.
Thankfully, gold is considered a “safe haven” investment. When other stocks or investments hit a wall, the value of gold tends to hold steady, protecting your investment even as others drop. In many cases, the value of gold will continue to increase despite the drop of other investments.
This consistency and expected value increase make gold a safe and worthwhile investment for those looking to invest their funds with reduced risk. Whether you visit gold dealers or purchase gold mining stocks, chances are you won’t see your investment drop very much.
What About Precious Metal Price Swings?
Although gold is considered a safe investment, it is not impervious to price swings. Like any other investment or commodity, the value of gold over time does not look like a straight line on a graph. The price of gold has seen both highs and lows over the years, even though it is currently worth double what it was ten years ago.
For example, a high point for the price of gold was in 2011 when one ounce cost around $1,900. Today, the price of gold tends to hang around $1,200.
The lowest price for gold was in 1933 when Franklin D. Roosevelt made it illegal for individuals to own gold. During this time, the U.S. government paid citizens $20.63 an ounce for their surrendered gold. It was not until 1974 that citizens could have private ownership of the precious metal again.
Even so, in recent years gold has seen a consistent rise in value, even when inflation has hit record highs. Since the 1970s, gold’s value has typically risen during recessions. So, even as other currencies falter, gold endures.
What Are Gold Premiums?
Getting your gold from gold dealers generally means that you will have to pay a premium on top of the spot price. The spot price refers to the price you see on the commodities exchange for gold trading. When buying from a dealer, though, you will likely have a higher overall cost.
Premiums generally consist of dealer fees, manufacturing costs, and distribution expenses of the gold dealer. Premiums also apply when selling gold to a dealer, as they will pay less than the spot price for your gold. Before purchasing gold from a dealer, be sure to do thorough research and find more information on the expected premium payment.
However, the value gold can gain over time easily outweighs the high initial investment cost.
Gold Coins Vs. Gold Bars
Investors tend to favor two forms of gold: coins and bars. Gold coins are popular among collectors and tend to weigh less than one ounce. Some of the most popular gold coins include:
- The American Eagle from the U.S. Mint
- The Canadian Gold Maple Leaf
- The Krugerrand
- Credit Suisse Gold Bars
Another popular option is gold bars. Most investors prefer to purchase bars that weigh one kilogram or less; however, there are 100-ounce bars available for those looking for a more significant investment. Larger gold bars are the preferred product for financial institutions, exchange-traded funds, and central banks.
One advantage bars have over coins is that you’re much less likely to misplace a big bar than you are a small coin. However, you can often buy coins in higher quantities all at once, allowing you to sell however much you like when it’s advantageous to do so. Whichever you choose, you’re making a wise investment.
Where to Store Your Gold
Among the top common concerns about buying gold is how to store it. Investors have various options for storing their precious metal:
- Safety deposit boxes at the bank
- Residential safes
- Precious metals storage services
The decision on where to store your gold ultimately depends on your personal preference. However, it is essential to remember that accessing your gold at the bank or through other precious metals storage services requires extra steps and will take you longer than retrieving it from your home safe.
The Potential for Fraud In the Gold Industry
Another common concern for aspiring gold investors is verifying the quality and validity of their gold. Unfortunately, plenty of fraudulent dealers are out there taking advantage of those looking to purchase gold for a reduced price.
Gold fraud comes in various forms. For example, common scams include companies claiming to offer storage for your gold or stating that the price of the gold directly links to a stock price. Other scams include fraudulent financing agreements that claim to make you a lot of money with little to no risk.
One of the most important things you can do to protect your gold investment is to vet your dealers. Investors can vet potential gold dealers with various methods:
- Check that the Better Business Bureau accredits the dealer.
- Use the U.S. Mint’s database to find a list of qualified gold coin dealers.
- See if the dealer has a membership with the National Futures Association’s Background Affiliation Status Information Center (BASIC).
It is essential to vet a potential gold dealer by checking their background before making a gold purchase. Doing so protects your investment and helps you avoid potential fraud.
What Are Gold Investment Funds?
Investing directly in gold often comes with a high price tag. Additionally, direct investments are often complicated and make it challenging to improve portfolio diversification. Thankfully, aspiring gold investors have another option: funds.
Mutual funds and exchange-traded funds for precious metal companies allow investors to invest their money in gold without the extra costs or complexities. As registered securities, mutual funds and exchange-traded funds (ETFs) come with legal protection and regular investment disclosures.
ETFs and mutual funds give investors a cost-effective way to diversify their portfolios by investing in different types of precious metals and gold mining companies. Investing in these types of funds includes varying levels of risk and is especially complicated. It is also important to remember that precious metals have different tax treatments than traditional stocks.
What Is the Utility Value of Gold?
Another common question potential gold investors ask is the utility value of gold. As a naturally beautiful and durable material, gold has many uses, including:
When it comes to gold coins and bars, the utility primarily lies in the monetary value. However, gold owners can choose what to do with their privately-owned precious metals.
How to Start Investing in Gold
After doing your research, you may decide that gold investments are advantageous for your portfolio. However, it can be challenging to know where to start.
The first thing to do is decide how to invest in gold. Explore options in funds and direct investments to determine which offers the ideal level of risk and costs for your portfolio.
If purchasing gold directly from a dealer, make a storage plan before walking away with the precious metal. Home safes offer easy and quick access to your gold, whereas safety deposit boxes provide an extra level of security.
Whether you want to invest in gold to create supplemental income or contribute to your retirement accounts, Oxford Gold Group can help you get started. Experts understand the gold market and can help you explore your portfolio options and create a plan that fits your investment objectives. In addition, they’ll help you understand the benefits and common concerns about buying gold so you can be more confident in your investment.
Would you like your investment portfolio to meet the gold standard?
Oxford Gold is among the many choices available to individuals who intend to purchase precious metals. Before you open an account, you must take the time to compare several alternatives to search for the most effective deal for your scenario. You could find an account with lower fees or a firm that runs in a more convenient place.
If you want purchasing precious metals, our guide to the best gold individual retirement account companies is an excellent area to start.