Since the dawn of time….Gold has been a
symbol of wealth, beauty, success and… gangster bling the world over.
And among investors these days it’s also been a very hot topic. In 2019, the price
of gold rose by more than 30% – and some analysts, plus some who think a recession is coming,
think it has further to run yet. But for all that talk… how do you actually
invest in gold? Well, in this video we’re going to explore why gold matters, the many
ways you can invest, and some of the risks involved. Gold is one of the oldest forms of currencies,
with coins dating as far back as 800bc. And up until pretty recently it was still
used as the global standard for trade. That all became a bit shaky around WW1, but it wasn’t
until 1970 that the gold standard officially ended. Now we have the fiat or paper standard
which is issued by the central banks and most commonly carried around in your pocket as cash.
But when these currencies start to fail us.. You know, because of hyperinflation, underinflation,
recessions or stock market crashes… it’s historically been gold that we fall back on
– which is why the price of gold tends to go up when economies start to perform poorly
or when grandma starts getting nervous again about the state of the world. In the last couple of years, we’ve been
moving through a period of global economic uncertainty, thanks to the US-China trade
war, unrest in the middle east and changing power dynamics around the world. Because of
this, the central banks have us sitting at record low interest rates.
This is why gold has reappeared as a hot commodity. And if interest rates continue dropping – even
into negative rate territory — well, gold could become a lot more important. So how do you invest in it? There are two
main ways that you can put your money into gold. You can buy physical gold, or you can
invest in gold via the stock market. Physical gold is where you actually own the gold, as
in, you can hold it, or wear it, or store it in a safe. The benefit of this is that you own something tangible, which can make it less risky than investing
in something like stocks – where if it all goes to hell, you’re left with nothing more
than a piece of paper in your hand. If the price of gold goes down…in the least you
can make a nice pair of earrings out of it. The most common forms of physical gold people
usually invest in are gold bars, aka bullion, gold coins – and of course jewellery.
If you’re a serious investor though – you’ll get the best price for gold in its bar form.
Meanwhile, coins and jewellery are given as gifts or for special occasions like a wedding
or Chinese new year. Finally, you have what’s called unallocated
gold investing, where it’s still physical, but not in your hands. Instead, you’re investing
in a dealer’s pool of gold – so really, it’s more like a contract. You’ll never
get to handle any of the gold and it can be a little riskier too.
How do you buy it? You can literally walk into a bullion dealer and walk away with gold
in your hand. Or you can buy it online and have the gold delivered to you or stored in
a vault until it comes time to sell – and there are costs there too.
There’s even a few apps out there now that let you trade gold on your phone.
Just remember: No matter how you’re buying physical gold – make sure it’s an authorised dealer
– because yeah, fool’s gold is still a thing. The other way to invest in gold is over the
stock market – and there’s a few ways to do this. 1. You can buy gold stocks. That’s
where you invest in a company that has gold exposure – like a mining company.
It’s not always easy to pick the right company, but as a general rule of thumb, companies
with strong gold exposure will see stock prices go up when gold prices go up.
If stock picking isn’t for you – you can invest in a Gold themed exchange traded fund,
which is a listed fund that is made up of multiple gold companies or which tracks the
price of gold. If you want to learn more about ETFs, I actually
just did a video on that so check it out in the link below If you’re feeling especially brave, you
can invest in gold through the futures market. Futures traders look to profit from price
movements – so they can still profit whether prices are rising or falling. However, because
futures contracts can be highly risky and complex derivative products, this is better
suited to advanced traders. Remember, with the stock market you’re
not actually owning physical gold so you’re exposed to all the usual risks that the stock
market carries, such as market volatility, company bankruptcy and the possibility of
losing your investment entirely. Why might you invest in gold? To make money from it – when gold prices go
up, so does your wealth. To protect your wealth – whether you believe
a recession is coming or not, gold has historically been a safe bet for your money. No. three, it’s liquid – it’s easy to convert into cash And fourth, on the sentimental side, it can
be a terrific gift that is also an investment. What are some of the downsides? Low risk, low-reward – as is often the case,
this means your returns over a long time frame might be lower than with other kinds of investments
– like stocks. Ongoing costs: If you’re buying physical
gold, there are fees to consider, such as dealer fees, storage, and insurance costs.
No income: Unlike owning property which generates rent, or shares which can pay dividends, physical
gold won’t earn any income until you sell it. Price volatility. If you’re investing in gold via the stock market, it comes with the
same risks you normally get in stock market investing. That is, you risk losing your money
altogether. Just because you’re investing in a gold stock – doesn’t mean it’s a safe
investment. So do your homework. So whether you think a recession is just around
the corner, or you want to diversify your stock portfolio, gold could be a great asset
to consider investing in. But as with any investment, it’s not for everyone. So what do you think? Do you think gold is a good investment? And what’s your flavour of choice? Let us know in the comments below. There’s a lot more to it than what I’ve
gone through, so if you want to find out more about gold investing or how to invest in shares
or ETFs, you can visit Finder.com.au and the links are in the description below. Thanks for watching, I’ll see you next time!