Investment Guide: How to Invest in Gold?

Investment keeps the money flowing in an economy. Though experienced investors know ins and outs of the investment industry, they are bound to make mistakes. When they make mistakes, they learn from it. “I became a pro-investor overnight”, said no investor ever. For someone who has never invested his/her money, investment can be tricky and confusing. If you want to start your investment journey and don’t know much about it, worry not. We have got you covered. You can start your investment journey with gold. Keep a tab on the current gold Price as it will affect your investment decisions.

In this article, we have covered the basics of gold investment, i.e. a beginner’s guide to gold investment. Here are the basics of investing in gold that will answer all your questions related to how to invest in gold and a few popular investment options.

Why is gold a preferred investment instrument?

We live in volatile times. You never know when an economy would be at its lowest. Keeping this in mind, investors seek to risk-proof their investments by opting for gold as an investment option. The yellow metal has been retaining its value for thousands of years. This is why investors trust liquid and tangible assets such as gold. The yellow metal isn’t backed by any debt or third-party’s responsibility.

Investors like to invest in physical gold because it is universally accepted. The yellow metal is held by major central banks across the globe. Having said that, gold purchased for personal use isn’t an investment. Just like family isn’t an investment, gold for personal use, too, is not an investment. Rather, it is the last resort in case of a financial crisis. If you have gold, it ensures that your wealth is preserved for the future. Later, it can be passed down generations.

How to invest in gold?

Mentioned below are the various ways in which you can invest in gold:

  • Investing in physical gold

There are plenty of ways to invest in the yellow metal. The simplest, yet safest, way to invest in gold is by buying gold bars and gold coins from companies like Lear Capital.

  • Investing in Paper Gold

These are various financial instruments such as gold ETF funds, gold certificates, gold futures, and gold mining stocks that are typically recommended by the banks. Those who opt any of these options need to analyze the risk associated with them as well as the rewards/returns offered.

The administrative and handling charges are minimal because, most of the times, such options need little administrative and handling. Though investing in paper gold isn’t as same as investing in physical gold, paper gold investment exposes you to intermediation. However, counterparty default risk, like default by your broker or bank is always there.

  • Investing in Bars and Coins

Gold buyers buy gold because they relate to the identity and the tradability of gold. Due to this very reason, gold refiners produce gold coins and bars with purity, weight, and brand engraved on it. As for the gold rate, it is determined by the weight in addition to refining & producing costs. For instance, the smaller a gold bar is or the highly-detailed a coin is, the higher the charges will be.

Note– For a private investor, buying 1 kg gold bar is practical as it offers more liquidity.

Which Coins and Bars to Buy?

Every investor, regardless of his/her investment experience, has this question in his/her mind. When it comes to buying gold coins and bars, one size doesn’t fit all. It all boils down to the investment preference of an investor. Additionally, the capital you have and the liquidity you expect affect your investment decision. From an investment point of view, you would want to cumulate as much gold as you can. Ideally, you should aim at gold products that come with the most attractive returns. Having said that, keep liquidity, as well as the potential need of partially re-selling your gold to fulfill your financial needs, in mind.

When you have made up your mind and have decided which gold coins or bars you want to invest in, the next thing on your mind should be its storage. Before deciding where to store gold, keep its safety in mind. While there are various solutions available, you ought to sort out the options on the basis of maximum safety & liquidity.

Before you start looking for various options to choose from, you should first analyze your investment goals. On the basis of these financial goals, you should opt for an investment tool.

Before making any investment-related decision, experts recommend reading intensively about gold, so that there is no room for confusion. Investing in gold exposes you to various risks, knowing what you’re getting into would be helpful. While investment is no child’s play, it isn’t rocket science either. If you are a new investor, plan your investment and take baby steps. Slowly and steadily, work on accomplishing your investment goals.

FG Editorial Team
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