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gold investing guide

Comprehensive Beginners Guide to Gold Investing [2019]

Joining the investment world is not an easy task, as there is a lot of information you have to learn about. Investing in gold isn’t straightforward; if it were, a lot of persons would have jumped into it. As a beginner to the world of gold investment, you have to ask yourself some questions and make your own due diligence on the type of gold you are going to invest in and the company that will help you acquire gold equity in a professional manner.

What kind of gold do I want to purchase? Where can it be bought? What time is the right time to purchase it?

Before you jump into gold investment, it is advisable that you have those questions answered to reduce your chances of failing.

To ensure that you make the correct choices with your gold investment, we have decided to put together a comprehensive guide on how you can invest in gold properly.

Why should you opt-in for gold investing?

Why do you think investing in gold is a good option for you? What benefits do you think will accrue to you from such an investment?

The answers you get will be dependent on who you ask. No matter how different their answers may be, a common aspect is that gold is a great product that ensures that you are protected against drastic financial failure.

A lot of people fancy the fact that when they invest in gold, they invest in a tangible asset. They value the fact that they can hold gold coins in their hands. It is unlike a lot of assets, which are intangible like mutual funds, bonds, and stocks and digital currencies.

other than that, Compared to other popular metals applied for investments, gold has the most effective safe haven and hedging assets across a number of countries.

Mutual funds and other intangible assets only come in the form of a piece of paper. Gold can be held in your palms and stored in your safe, while you bask in the aura that your investment is indeed real.

Another aspect that a lot of gold investors like is the fact that gold assets are highly liquid. What this means is that you can easily sell them for money. Currencies tend to fall, but the value of gold remains unchanged or changes mildly. You hardly see the worth of gold plummeting drastically. Why is this so? Gold is recognized in the global market and backed by a lot of currencies. Gold is utilized in numerous industries.  

World Gold Council , reports that the annual mine production of gold in recent years has been close to 2,700 tonnes. About 2,000 tonnes goes to jewelry, industrial and dental products, around 500 tonnes goes to retail investors and exchange-traded gold funds.

Main Benefits for Investing in Gold

  • Gold is A tangible asset compared to stocks, bonds, and other currencies
  • Gold is a good option for diversifying your investments portfolio
  • The Price of gold has been steady during the years
  • supply and demand principles and Gold jewelry recycling, in particular, make the value of gold constantly relevant

What effects the price of gold?

The current price of gold as of June 29, 2019, is $1,402.25 per ounce (OZ).

The price of gold is constrained by supply and demand. Nevertheless, unlike most assets, saving and disposal of gold act as larger factors in affecting its price than normal consumption. Although we’ve discussed that gold’s price is relatively stable, like many other assets there are different factors which can affect gold prices across the world.

Histrorical prices of gold – the last 5 years

  • 2019 – $1,305.80 / Annual Change% 9.41%
  • 2018 – $1,268.93 / Annual Change% -1.15%
  • 2017 – $1,260.39 / Annual Change% 12.57%
  • 2016 – $1,251.92 / Annual Change% 8.63%
  • 2015 – $1,158.86 / Annual Change% -11.59%

The influence of the central banks

As we all know, central banks are huge financial entities that can hold many assets, gold reserves included.

For example, By the end of 2004, central banks and official institutions held 19% of all above-ground gold as official gold reserves.

European central banks, such as the Bank of England and the Swiss NationalBank, have been key sellers of gold during this time. Although central banks do not generally announce big gold purchases that may affect the market, some, such as Russia, have stated interest in growing their gold reserves again as of late 2005, we can also mention the growth of gold prices during the ’80s as part of russia’s invasion to Afghanistan.

As a result, the gold price can be closely correlated to central banks via their monetary policy decisions on interest rates.

If market signals indicate the possibility of prolonged inflation, central banks may decide to raise interest rates, which could reduce the price of gold respectively.

Industrial demand and gold recycling

The Jewelry industry consistently considered for over two-thirds of annual gold demand.

while India is the largest consumer in terms of volumes, accounting for 25-27% of demanding 2009, accompanied by China and the USA. Industrial, dental and medical uses account for around 11-12% of gold demand.

In recent years the recycling of second-hand jewelry has shifted to a multibillion-dollar industry.

The term “Cash for Gold” regards to offers of cash for selling old, broken, or mismatched gold jewelry to local and online gold buyers or brokers.

War, invasion and nationwide crisis in relation to gold prices

When dollars were fully convertible into gold via the gold standard, both were regarded as money.

Most people preferred to carry around paper banknotes rather than the somewhat heavier and less divisible gold coins.

This happened in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and issue Executive Order6102 outlawing the “Hoarding” of gold by US citizens.

When is the right time to buy?

Before you go and invest your money in gold, you need to ask yourself some questions. How well do you understand the gold market when the timing is concerned? The same way it isn’t advisable to buy stocks at any time without considering the market conditions is the same way it isn’t for gold.

The perfect answer to this is based on how well-informed you are on the American economy.

Gold is seen as the insurance policy against the eroding of the financial system of the US. Generally, if the economy is suffering, the price of gold rises. If it is seen that the economy will improve, the value of gold reduces. This is a general situation and doesn’t happen every point in time. Though there may be exceptions to this rule, it is still a good rule to keep in mind while you try to figure out the gold market.

Before you buy gold, ask yourself where the economy is headed. There are a lot of premium gold investment advisers that lend their voices to when they feel the price of gold will plummet and when it will rise.

Rule of thumb for investing: Gold is like any other investment out there, meaning that you should buy them at their temporary low point. This offers you a greater chance of making a profit.

Types of gold – which should I buy?

At this point after understanding the basics of gold investments, the overall prices, what effects gold prices and the best times to acquire gold, you should ask yourself what types of gold are available out there and which you should buy.

in the world of investing, Getting a mutual fund or bond is quite easy to do, as you can head to a bank and get it done. You can buy 5000$ worth of mutual funds at the bank without stress, but the same can’t be said for gold.

What do you do then? let’s Start by sorting through the alternative available in the gold market. we will briefly go over each option, while Each one offers different incentives for the investor.

Buying Gold Bars (Bullions)

The most popular way of investing in gold is by buying bullion gold bars.

gold bullion
UMICORE Gold Bullion

Bars usually offer lower price premiums than gold bullion coins.

In some countries, like Canada, Austria, Liechtenstein, and Switzerland, gold bars can easily be purchased or sold at the main banks. Alternatively, there are private bullion brokers that provide the same service and can offer better rates.

Gold Bars are accessible in different sizes:

  • Common Gold Bullion size is approximately 400 troy-ounces (12.4 kg). 1 troy-ounce = 31.10g
  • 1 kilogram (32.2 ozs) bars are also very popular, although many other weights exist, such as:
  • 10 ozs (11 oz; 311 g)
  • 1 ozs (1.1 oz; 31 g)
  • 10 g, 100 g, 1 kg, 1 tonne
  • 1 Tael (ancient measurement unit)
  • 1 Tola (11.3 g) ( Tola is a common Indian measure for the weight of gold and widespread to this day. Many international gold manufacturers provide tola bars)

Popular Gold Bullions Manufacturers:

  • Baird & Co
  • Emirates Gold
  • Heraeus
  • Métalor
  • PAMP
  • Perth Mint
  • Royal Mint
  • Umicore
  • Valcambi

While bullion coins can be easily weighed and measured against known values to confirm their authenticity, and also can be stored at home and easily sold because of their small size, most gold bars cannot, and gold bullion buyers often have bars re-assayed (re-assayed; special examination of precious metals to validate authenticity)

To stop bars from being forged or stolen, gold companies have developed ways to verify genuine bars, with the most popular method is to mark bars with registered serial numbers.

gold bullion with certificate

1 troy-ounce gold bullion with Swiss certificate

Good delivery Specifications
in Europe, Good Delivery bars (Good Delivery specification is a collection of rules declared by the London Bullion Market Association (LBMA) defining the physical characteristics of gold and silver bars)
are held within the London bullion market inner system, each has a provable chain of custody, beginning with the refiner and assayer, and advancing through storage at LBMA secret vaults.

Buying Gold Coins

Gold coins are an extremely popular way of owning gold.

Australian Gold Nugget, a gold bullion coin.

Gold coin of Roman Emperor Valentinian II

Gold coins are priced in relation to their fine weight (fineness of a precious metal signifies the weight of fine metal, in proportion to the absolute weight which includes deducting base metals and any impurities.) plus a small premium based on supply and demand (unlike numismatic gold coins, which are priced by supply and demand based on rareness and state of the coin).

The sizes of bullion coins vary from one-tenth of 1oz to 2oz, with the 1oz size being the most widespread and immediately available to purchase.

The Krugerrand is a widely owned gold bullion coin, with 46 million troy ounces (1,400 tonnes) in circulation.

Other popular gold bullion coins include:

  • the Australian Gold Nugget (Kangaroo)
  • Austrian Philharmoniker (Philharmonic), 
  • Austrian 100 Corona, 
  • Canadian Gold Maple Leaf, 
  • Chinese Gold Panda
  • Malaysian Kijang Emas
  • French Napoleon or Louis d’Or
  • Mexican Gold 50 Peso
  • British Sovereign
  • American Gold Eagle
  • American Buffalo

As a beginner investor to gold, you can purchase coins from a variety of dealers both large and small.

Fake gold coins are common and are usually made of gold-layered alloys.

During the 19th century, platinum was cheaper than gold and was used for counterfeiting gold coins.

Since about 2015 counterfeit coins are “Flooding the market at an astonishing rate” and “It’s gotten to the point where even people who deal with coins all the time may not be able to recognize a counterfeit coin right away”, 2016).

The coins consist mostly of tungsten layered lightly with real gold, have the correct weight, correct or near-correct dimensions and are professionally produced in China.

Biting gold, to this day is known as a common way to identify frauds. The rationale behind biting a coin was the assumed broad distribution of gold plated lead coins in the 19th century.
Since lead is much softer than gold, biting the coins is a reasonable inspection for counterfeiting. While fine gold is softer than alloyed gold, and galvanized lead is softer, biting coins can detect the most unskillful of fakes.

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