In recent years there has been a boom in the price of gold and this has led many people to develop an active interest in investing in gold & other precious metals.
Despite what many pundits claim, no one can predict future price movements of any commodity or stock, so in this article I want to lay out some guidelines that will increase your chances of your gold investment being profitable.
The first- most obvious point is that to make money on any investment you need to "buy right". That is actually buy what you expected and pay a reasonable price for it.
The cheapest ways to buy gold, in sequence, are: bars (Ingots), Krugerrands & American Gold Eagles.
If you live in the UK, the gold eagle will probably be replaced in this list by the gold sovereign. Sovereigns also have the advantage of being exempt from C.G.T. (Capital Gains Tax) in the UK.
Once you leave this small group of coins prices rise rapidly and your opportunity for pure gold investment profit falls.
Having said that, some of the coins not mentioned, often provide greater potential for numismatic gains- but that is a different story.
The next point is, you have to be conscious that one day you plan on selling this investment. Therefore you need to be aware of what your exit strategy will be.
Who will you sell to? In what quantity? Do you want to sell small quantities over a period of time?
From these three choices, gold ingots can, at first glance, be usually purchased for the lowest percentage premium over the gold "spot" price.
It is not widely appreciated that the price for a single one ounce bar is usually exactly the same as for a single one ounce Krugerrand- and in quantity Krugerrands often work out cheaper. The reason is that there is a vibrant market that "knows" what a Krugerrand is -whereas some one ounce ingots especially those from lesser know smelters, seem to carry a slight cloud of suspicion (it's as if you have to "prove the ingot is good").
However, if you plan on investing more money in gold, the larger bars, such as one kilo sell for a lower percentage premium than Krugerrands. But, again, they are not as easy to resell. You will need to visit a bullion dealer to get a good purchase price for gold bars. Would a restriction like this affect you?
Another issue with the larger bars is that you can't simply sell a portion of it when you want to!
The American Gold Eagle:
This has many of the same advantages as the Krugerrand. It is a widely recognized and traded coin. It sells (normally) for marginally more than Krugerrands- but depending on where in the Country you are, you may be able to get the same price as a Krugerrand. It is a superior looking coin and would get my "thumbs up", as the bullion coin of choice.
The final piece of Gold investment advice could be considered common sense- but it bears repeating:
Buy when prices are low!
Whatever you invest in, be it stocks, bonds or gold buy when the price is low rather than high!
The recent boom in the gold price has in part been driven by people hearing about the price rises in the media and trying to jump on the bandwagon.
If you are just finding your feet in the gold investment world, it may be wise to watch, learn and wait till prices pull back before investing.
Until next time,
Happy Gold Investing,
Paul
If you would like to learn more about gold & bullion coins, then visit my websites for free information:
http://www.buybullioncoins.com/blog/
http://www.value-of-gold-coins.com
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