Iruni Kalupahana JadeTimes Staff
I. Kalupahana is a Jadetimes news reporter covering Business
Introduction to Gold Investment
For thousands of years, gold has been a symbol of wealth and stability. The earliest recorded use of gold dates back to about 4000 BC, where it was highly valued for its rarity and beauty. As an investment class, there are a few advantages in gold over other commodities. It is highly liquid, universally recognized, and accessible to a broad range of investors. Unlike other commodities, such as oil or wheat, which investors can only purchase directly, one can buy gold in a wide range of different forms, from actual coins and bars through to 'digital' products, such as ETFs and mutual funds. With the advent of electronic, cutting edge trading platforms, access to the market in gold has become easier, and today, investors can trade the metal as easily as equities. Gold, by direct ownership or by any other digital means, remains an object of allure, as a method of preserving one's wealth and protecting against economic volatility.
Physical Gold
The investment in physical gold beckons, handing one the real and tangible one whose value lives through time. Among the most highly traded coins in the world are the South African Krugerrand, the American Eagle, and the Canadian Maple Leaf. The sizes that gold bars come in range from small wafers to the larger 400 ounce "good delivery" bars favored by central banks and institutional investors. While physical gold is extremely well liked, it does require safe, secure storage options, such as a home safe or a bank deposit box, and should be insured against theft or damage. Gold jewelry is another form of investment, often combining precious gems and metals. Generally speaking, jewelry is of lesser stable value than bullion, due to retail markups and sometimes variable demands for the craftsmanship. One needs to check on the purity, usually between 14 to 24 karats, for the investment value of gold.
Digital Gold Investments
Other less hassle prone ways of investing in digital gold include investment through ETFs, mutual funds, and sovereign gold bonds. The ETFs track the price of gold directly for example, the SPDR Gold Shares are tradable on stock exchanges. These are liquid and cost effective ways to take exposure to the price of gold. These funds invest in both physical gold and in the shares of companies involved in mining and production, offering the possibility of greater growth but with higher risk owing to factors unrelated to the price of gold, such as political instability or environmental concerns. As certain governments like that of India are the issuer of Gold Bonds, this avenue of investment provides assured interest rates and tax advantages sans any storage or security related hassles. These products in electronic form are very appropriate for investors desiring diversification, flexibility, and reduced entry costs.
The Benefits of Investing in Gold
It gives several strategic advantages to investing in gold, partly as a hedge against inflation and as a source of market stability. This is because, over time, gold has generally been a better preserver of value than paper based currency. While £200 invested in gold in 1990 would have risen in value by about 650%, the same amount held in cash would have appreciated in value owing to inflation. Because gold is negatively correlated with stock markets, it tends to appreciate when other assets go down, making it a hedge during periods of economic uncertainty. Secondly, due to its easily recognizable nature, gold could be traded or sold in virtually any market around the world, hence offering unmatched liquidity. In a diversified portfolio of investors, gold acts to add an element of security due to its diversity and is, therefore, a prudent choice both for protection in the short term as well as in the long term.
