Often times you can hear on the TV where people are talking about gold and how it is the best commodity to invest in, and if you are investing in gold that everything will be OK. The truth is that gold, even though is a pretty solid thing to invest it, also has it’s problems and gold is definitely not always the best thing to invest in, if you are looking to make quick profit, which is what is true for pretty much every investor that’s present on the markets. First thing that need to be pointed out about investing in gold would be the different ways of investing in this precious metals that exist.
There are just 2 actually methods of investing in gold, each of them having several subcategories. The first one would be to buy actual precious metals, which is called buying bullion. Here we are making the distinction between bars, ingots and coins. Coins can also be divided up onto bullion and numismatic, make sure that you do not buy numismatic coins if you are only interested in precious metals, because they will cost more, and you might not be lucky to get more for them than when you were buying them.
The opposite of investing in bullion precious metals would be investing in precious metal stocks, certificates or ETFs. All these are basically financial instruments, apart from certificates. When we say precious metals stocks, we do not means literally stocks of gold for example, we are talking about precious metals mines, for example stocks of a gold mine which has released stocks in order to gather capital to fund new precious metal dig site research and/or equipment.
If you were to believe what is said about gold, that every gold investment will make your rich, and you decide to invest in the precious metals stocks, in the mine stocks, you could end up being surprised by the outcome of your investment. Stocks of the mine where you invest money could end up losing a lot of value, because of bad decisions made by the management and as the stocks lose value, so do you.
Precious metals like gold are a great store of value, which is not the same as being a great thing to invest money for profit. There is a distinction between the two, and before you start dealing with precious metals investment it’s important that you learn what this difference would be.
When it’s said that gold is a store of value, it’s means that gold cannot lose value like currencies can during times of inflation. When money is losing value, think of gold as the thing that keeps your feet from getting wet while there is a rising tide or a flood. Whenever the central banks are printing money that has no backing, then the overall value of the money that exists in circulation loses value, even the one that’s in your pocket. Prices of everything go up, and the money that you have in your pocket now allows you to buy less things.
If you made an investment before the inflation boom, then you do not own the currencies, you own gold, and great thing about gold is that as the prices of pretty much everything also goes up. That way when you decide to sell the gold and turn it into money again, you will get more. Some of the profit that you make is because of inflation, other, if the markets have been good will be because of actual increase in demand or decrease in production which has an influence on the actual price of precious metals. What it all boils down to is that precious metals, gold especially isn’t as hot when it comes to investments, there are also drawbacks to invest in gold, and you need to be careful not to join the hype and lose money.