Gold Investments: The Basics

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Gold investments are often looked upon as relatively stable investment in precious metals, especially when the currency markets dictate a weak currency position or markets dictate economic, political, social, or other currency-based crises. Gold investments have historically proven to be more stable as compared to other forms of investment, but, truly speaking, almost any choice would be subject to a certain amount of risk. In fact, the very word “investing” personifies an inherent degree of risk.

With gold investments, many investors often get confused as to the type of metal that should be bought. Well, mostly the answer would depend on the motivating factors influencing your purchase decision. Are you looking for short term gains? Are your goals long term? If for instance, your sole intention is to ride on market conditions, then bullion coins may be adequate, but capital and monetary controls are going to dictate your investment decision, you may want to ride with pre-1933 European and American gold coins.

An additional factor that is worth mentioning, especially for individual investors is that they often equate the purchase of jewelry and other items as gold investments. While technically speaking, these investments do have some value, they are not truly gold investments, especially because the individual investor is not aware of quality and other considerations.

In addition to market conditions, the purchase of these should also factor in portfolio diversification and other similar considerations. An investment adviser may be able to provide some guidance on the exact proportion of these you should carry, but, typically, a double digit asset allocation to gold investments is a good starting point. Some start with 10%, while others allocate a larger proportion of their portfolio to such choices. As with other investment vehicles, educate yourself thoroughly on the various intricacies of these before you call your agent to purchase. Most importantly, thoroughly investigate the reputation and authenticity of the agent from who you are purchasing. This will save you many headaches in the future.

In addition to actual gold investments, some investors also opt to purchase stocks. These stocks are not real precious metal, though, and would be subject to the same market forces as any other form of stock investment. An additional investment class related to stocks is futures contracts. These are relatively volatile and speculative in nature, though.

Not only individual investors, many countries, too, have set aside reserves as part of their economic and currency-relevant decisions.

Overall, coins and bullion bars are considered a safe bet, especially if gold investments are a part of your long term investment strategy. As with any other form of investment, long term gains should dictate your investment decisions and also your asset allocation. Furthermore, as with any investment be wary of gold investments scams and other forms of fraud targeting innocent investors.

Disclaimer: This article is not intended as investment advice. You must check with a qualified professional before making any investment decision.

Photo by: Jeff Belmonte

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admin July 22, 2010 at 6:10 pm

Overall, gold coins and bullion gold bars are considered a safe bet, especially if gold investments are a part of your long term investment strategy.

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