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What Every Beginner Should Know Before Investing In Gold

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Updated on December 19, 2022 by
What Every Beginner Should Know Before Investing In Gold

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Investing entails acquiring assets that gain value over time and from which you’ll profit. There are many investment portfolios you can invest in, one of them being gold.

Gold is a highly precious metal considered to have a lot of value, hence why investors hold on to it. It’s said that most investors acquire gold not as the main investment portfolio but as a sub to the main ones. 

Suppose you want to invest in gold. Like any other investment, knowing as much as possible about gold is important. That said, here are some of the pieces of information you need to be aware of before investing in gold instruments:

  • The Types Of Gold Investment

There are many ways you can invest in gold. You can buy physical gold or gold Exchange-Traded Funds (ETFs.) With physical gold, bars, coins, and jewelry are the options you have. On the other hand, with ETFs, you can buy the stocks of gold-mining companies.

The above mentioned are the main ways to invest in gold. It’ll be an added advantage if you do more research on what other options are available. As you research, please find out how each option works, its merits, and its demerits. Doing this enables you to make an informed decision.

  • The Price

Different gold investments cost differently. The price of physical gold depends on the size of your bullion, commonly known as a denomination. Here, the bigger the denomination, the higher the price you’ll pay to acquire the investment.

Gold stocks often depend on the economy, and they work like normal stocks. The price of a gold stock depends on its current market value.  

As you invest in gold, you’ll realize gold prices tend to be fixed, with minimal changes. However, it doesn’t mean you can’t achieve affordability. 

With a little research, you’ll learn the cheapest way to buy gold. For instance, you can buy in bulk and get discounts or from experienced bullion traders who know where to source their gold at affordable prices. Once they do this, their overhead costs are low, reducing the amount you’ll pay when buying. 

  • How To Certify Authenticity

With gold being a high-value commodity, there’s a high probability of scams. You can buy gold as an investment, only to realize later that it’s fake. Therefore, as a beginner, it’s crucial to know how to differentiate between real and fake gold.

With physical gold, especially bars, weight is a major determining factor. Gold bullion bars come in standard weights for different denominations, which are marked on the bar. Suppose a particular bar is indicated to be 250 grams. Yet upon measuring, it ends up just being 248 or 249 grams. It’s a clear indication of fake gold.

Alternatively, check the markings on your gold bar investment. Gold bars produced correctly have the logo of the minting company, their purity, weight, and serial number imprinted on them. If it isn’t the case, please question the authenticity of your piece.

On the other hand, with gold ETFs, you should verify the legitimacy of the gold mining company whose stocks you’re buying. First, do they exist? Do they have bad publicity surrounding them? What do previous and current investors say about them? The answers will help determine the legitimacy of your gold ETFs.

  • The Liquidity

In investment, liquidity refers to how easily you can transform your investment into cash. In this case, how easily can you get cash from your gold investment?

The liquidity of your gold investment depends on the type you’ve chosen. Suppose you opt for physical gold in the form of bars. Large-sized gold bars aren’t as easy to dispose of as small-sized ones. Remember, large ones come with a hefty price, which most investors can’t afford since gold investment is part of diversification. Investors have other investments they’re funding. Nonetheless, it’s quite easy to sell small denomination ones, even in bulk.

Gold ETFs are more or less liquid. You’ll always find a buyer or seller for your shares. But the question is at what price? Should you need cash within a short period, you might be forced to sell at a loss if the current market price is lower than the price you bought. 

With the knowledge of liquidity, it’s advisable to buy more of the highly liquid gold portfolio should the need to dispose of them quickly arises.

Conclusion

Investing in a high-value asset increases the chances of high returns. It’s often the case with gold if you play your cards right. One way of playing the cards right is learning as much as possible about gold. The discussion above has highlighted the crucial things to learn about investing in gold, especially as a beginner. Highly consider using this insight in your gold-investment journey.

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