Candlestick Trading Blog
May 2, 2008
Buy Gold
Should you Buy Gold? Investors interested in investing in gold must first understand what gold funds are. When an investor wants to purchase gold, he or she can purchase it in units at a set gold price and the profit/loss of the investment is reflected in the movement of the unit price. Investors may purchase gold funds in the form of mutual funds or exchange traded funds (ETF). This form of gold investing is popular with the business people who do not want to spend time figuring out where they will store physical gold coins or bars after they buy gold. Mutual fund investing includes a group of investors who pool their money together and a fund manager directs that money to invest in various investment vehicles such as stocks and bonds, money market accounts, or other securities. Those investors who have pooled their money make capital gains and collect the dividend or interest income. For those investors who want to buy gold funds, they can also invest in and ETF, as mentioned above. A gold investment such as an ETF takes place when an individual invests in gold, but does not invest money into a pool with other investors. Instead the money is invested individually and the ETF investor is actually buying and amount of gold which is represented in an account. Additional ways to buy gold include the purchase of gold coins, gold bars or bullions, gold in escrow (digital gold), investing in gold producers (miners), and even gold futures. Those that invest in gold coins or bullion bars have the advantage that gold value tends to remain stable or increase over time, and you own it physically. The downside to this type of gold investing is that if you have a lot of gold, it can be hard to transport it, unlike gold stocks of course! Also unless you ship it from another company, it is heavy and hard to get through customs. Small coins of course are not hard to transport, they are very easy to sell and they attract less tax problems. Gold bullion and gold coins are perhaps the most popular with gold collectors and investors. Traditionally in circumstances such as high inflation, or currency inflation, investing in gold offer investors safety and security. Historically, the gold markets have provided the best protection against financial disaster and instability in the economy. The way this works is that in the event of a financial catastrophe, paper assets would be converted into gold. This explains why some investors just skip a step and buy gold bars or gold coins. It is interesting to note that when you have only paper in your investment portfolio, gold tends to move in the opposite direction of those paper investments. Troubled times typically increase the amount invested in gold. Investors opt for long-term protection of their portfolio through buying and investing in gold. These days, people continue to buy gold to protect their strong portfolio from a currency crisis, inflation, or recession, while gold investing should be based on macroeconomic consideration and the investment atmosphere. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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