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 its 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 . how do you actually invest in gold? Well, in this video were 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 wast 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 its 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 jewelry.
If you’re a serious investor though – you’ll get the best price for gold in its bar form. Meanwhile, coins and jewelry 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 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 are 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 its an authorized dealer – because yeah, fools gold is still a thing. The other way to invest in gold is over the stock market – and there are 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 is 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 int 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