What You Need to Know about Gold Investing

gold


invThere are a lot of different styles of esting.  It can be quite challenging, really, to dip your toes into the metaphorical pond if you aren’t sure where to get started, and where is “safe.”  That’s one thing about investing that isn’t talked about much, really: the fact that there is always some inherent risk that you take on by making an investment.

That’s part of what we’re here to talk about today, as well as some of the investment methods that aren’t as risky.  If that sounds interesting to you, make sure to continue reading.  You can get a primer for the topic here: https://www.pm-research.com/content/iijinvest/17/1/77, if that’s something you’d like.  Otherwise, stick around!

The Basics of Investing

To get us started, let’s take a moment to explore what investing is in the first place.  After all, how can we cover the details of precious metals and how to invest in them if we haven’t established the pillars of the market, right?  

Put simply, investing is the act of allocating money or resources with the hope of generating some sort of profit or achieving a long-term financial goal such as creating a retirement fund.Usually, it involves committing funds to an asset, venture, or project that will help achieve those goals.

Why do this, though?  Most of the time, the main objective of investing is to grow wealth by putting capital at risk in the hope of gaining a return on investment (ROI).

As we’ve hinted at, this can take many different shapes and sizes.  The various forms of investing include stocks, bonds, real estate, and of course, precious metals – amongst others.  The risk and potential reward associated with each investment option differ, and investors must consider their financial goals, risk tolerance, and other factors before making these decisions.

What are Precious Metals?


With that covered, let’s now look at what precious metals are.  If you want to know why gold is important, then this is the section for you.  First, take into consideration that these minerals have been important to humanity for centuries now, if not longer – since their discovery, they’ve never really gone out of style.  That already gives some credibility in terms of low-risk investing, right?

Precious metals are naturally occurring metallic elements with high economic value due to their scarcity, aesthetic appeal, and industrial uses. The most widely recognized precious metals include gold, silver, platinum, and palladium, though gold is our main focus today. These metals have been valued and used by humans for thousands of years as we mentioned above, both for their practical applications and their role as a store of value.

We’ll go into depth on gold in a moment.  For now, silver is valued for its industrial uses, particularly in electronics, photography, and solar panels. Platinum and palladium are primarily used in the automotive industry for catalytic converters, as well as in jewelry and electronics.

Gold


Gold is a chemical element with the symbol Au (from the Latin word “aurum”) and atomic number 79. It is a dense, soft, yellowish metal that has been highly valued and sought after by humans for thousands of years. Gold is known for its lustrous appearance, malleability, and resistance to tarnish or corrosion, all of which helps add to its value.

Historically, it has been commonly used in jewelry and decorative items due to its beauty and rarity. Additionally, it’s a valuable material in various industries, including electronics, dentistry, and aerospace, as it is an excellent conductor of electricity and does not oxidize or corrode.  Again, you can really start to see why it’s such a valuable asset in portfolios. 

In the financial markets, gold can be traded in various forms.  This includes physical bars and coins, exchange-traded funds (ETFs), futures contracts, and mining stocks. The prices are typically influenced by factors such as supply and demandand how investors feel about them in the moment (amongst other things).  Of course, these are factors that we generally need to pay attention to anyhow, as you can read more about it in this article

Why Invest in Gold?


The other big question that we have to answer here is, of course, why we should bother investing in gold.  At first glance, it may not seem like the best choice, especially since it doesn’t exactly bring in a lot of revenue.  You see, that’s not the focus of this style of investment.

Rather, when folks opt to invest in gold, it’s because they want a way to store their wealth without a huge risk of it losing a bunch of value.  Think about it this way: when you create a savings account, what is the goal?  You probably want to set that money aside and save it for something important, such as retirement, right?

Unfortunately, inflation impacts the value of currency such as the United States dollar.  You may notice that the cash in a traditional savings account isn’t going to gain interest at the rate that you want, and you may end up with money that has far less spending power than it did when you deposited it.  How can we really avoid this?  The answer is simpler than you may expect.

A hedge against inflation refers to an investment or strategy that seeks to protect the value of assets from the eroding effects of inflation. Inflation is the general increase in the price level of goods and services over time, leading to a decrease in the purchasing power of money.  Wondering what one of the biggest “hedges” is?

If you guessed gold, then you’d be correct.  In fact, it’s pretty much the go-to these days for those who want to diversify their portfolio with an inflation hedge.  Since gold doesn’t really lose value over time, compared to paper currency, it’s a lot less risky to have as an asset.

This isn’t to say there are no risks, but it’s popular for a reason.  There are entire investment companies around to help you if you decide it’s something you want to put in your portfolio as well!