Investors Guide to Gold investment

Author: Madhav Joshi

Investors may invest in gold thru ETFs, buy stock in gold miners and associated companies, and purchase a physical product. These investors have very good reasons to invest in gold. An investors’ guide to gold investment can show you how you can still profit by investing in gold.

Some are of the mind that gold is a barbaric relic that is without the monetary qualities of the past. Paper currency is the current days’ money of choice. They hold that gold’s only benefit is the fact that it is a material that is used in jewelry. On the other end of the spectrum are those that insist that gold is an asset of diverse inherent characteristics, making it unique and essential for investors to maintain in their portfolio.

Gold as the preserver of wealth

The reasons behind gold’s significance in the modern economy depend on the fact that it has preserved wealth thru generations. Paper-denominated currencies cannot claim the same.

In the early 1970s, one-ounce gold was worth $35. Suppose, at that time you could either hold an ounce of gold per merely keeping the $35. They would both purchase the same things for you. However, if you had an ounce of gold today, and changed it for today's prices, you could still buy something substantial with the gold. The $35 cannot claim the same. The value of the dollar has been eroded by inflation. Gold remained unaffected by inflation.

Gold as a diversifying investment

Generally, gold is a diversifying investment. Gold has historically served as an investment that may add a diversifying component to your portfolio. It does not matter if you are concerned about inflation, a plunging US dollar, or even protecting your wealth. However, gold is not correlated to bonds, socks, and real estate.

Gold as a dividend-paying asset

Gold stocks are generally more attractive to growth investors rather than to income investors. Gold stocks usually rise and fall with gold prices. However, mining companies are profitable even when the price of gold is down. Appreciation in the gold price is frequently magnified in gold-stock prices. A comparatively small appreciation in the price of gold may lead to important gains in the leading gold stocks generally getting a higher ROI than owners of physical gold.

Gold mining

The mining sector is apt to undergo high volatility. When assessing gold-stock dividend performance, consider the company’s performance over time regarding dividends. Factors like the company’s history of paying dividends and the durability of its dividend output ratio are the vital components to scrutinize the company’s balance sheet and other financial statements.

A company’s ability to maintain healthy dividend payouts is greatly increased if it has consistently low debt levels and considerable cash flows, and the historical trend of the company’s performance presents gradually improving debt and cash flow figures.

Given that any company goes thru growth and expansion cycles when it assumes more debt and has lesser cash on hand balance, it is important to analyze its long-term figures, instead of a more brief financial picture timeframe.

Modern investment options

  • Gold futures;

  • gold coins;

  • gold companies;

  • gold ETFs ;

  • gold mutual funds;

  • gold bullion;

  • gold jewelry.

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Gold investment : prospects

Gold has outperformed the S&P 500 over the 10 year period from November 2002 and October 2012, with an overall price appreciation of 441.5%. The S&P 500 conversely appreciated by 58% over the same period.

Conclusion

There are both advantages and disadvantages to every investment. In case you do not wish to hold physical gold, purchasing shares in a gold mining company could be a safer option. If you believe that gold can be a reliable hedge against inflation, you can invest in coins, bullion, or jewelry.