Gold Investment

Confidence in traditional investment vehicles such pensions and equities has seen better days and many investors are still licking their wounds after the dotcom crash that has overshadowed investment markets since beginning of the decade.

On the build up towards the dotcom meltdown over-confidence was epidemic amongst investors as they scrambled to put all their assets into technology shares in the hope of a get rich quick solution. Any adviser worth his salt will tell you to never put all your eggs in to one basket, but the in intense fervour of the moment many didn’t listen…and many lost everything. These lessons have been learned and now investors are far more conscious of the need for low risk investments that bring solid growth in the long term in order to balance the higher risk assets in any portfolio.

Gold has been widely coveted throughout history for its mysterious properties: it’s beauty, it’s multitude of uses and of course its scarcity. But from the investors point of view the most magical property of this precious metal is its stable nature.

Gold is well known to retain its value well, no matter how uncertain the political and economic climate of the times – it’s a well known fact when the outlook is grim, gold investment increases. After the false gold rush that was the dot com boom, many investors are rediscovering gold and are using gold as the stabilising element of a balanced investment portfolio.

How does one go about investing?

Gold investment is not as difficult as you might imagine and no, it won’t entail a visit to your local river with a sieve.

Gold investment is offered by a number of financial institutions and precious metal dealers. You can buy shares in gold mining companies and this is usually the best way to make a paper-based investment in gold. The idea is that gold mining shares should roughly mirror the shifts in demand and price of gold bullion. However this isn’t always the case and the values of gold mining shares are also affected by shifts within the company and its management.

Share certificates are one thing but nothing can compare to that powerful rush you get when you hold your own chunk of gold. Buying physical gold is sure to be an exhilarating experience even for the seasoned investor and surely one that can never be forgotten. You can buy gold bullion is the form of bars or coins and which form to choose depends on the needs of the investor.

Gold bars are well suited to the large scale investor and buying large bars is usually more cost effective than buying smaller ones. The downside of owning large bars is that, when it comes to selling, they’re not very flexible and you can’t sell off a small amount of your gold at short notice.

Gold coins are an altogether more convenient form which is competitively priced, universally recognised and easy to resell. Old (numismatic) coins may also have additional value on top of their intrinsic gold value if they are rare or collectable.

If you do intend to invest in physical gold you must first consider the security implications – where will you keep it? You can of course have a safe fitted into you home, but this is costly and it doesn’t ensure total security. For this reason many investors take the less romantic route and choose to house their gold safely in the vaults of their favourite financial institution.

Read our Buying Gold Guide >