good investment Gold investment guide for beginners
What does it mean to invest in gold? Is gold the best way to invest or are there better ways to preserve capital value in an economic crisis? Learn more about your guide to investing in this precious metal.
Man has long known gold as one of the best sources of personal adornment, being one of the few precious metals, and then made it a medium of payment and exchange, just like today's commercial currencies. The search for how to invest in gold as a safe haven in economic crises such as "Corona" has occupied many people in recent times, so we offer a comprehensive guide on how to invest in gold for beginners.
At one point in the modern era, gold was a standard for the value of national currencies, before this link was broken and exchange rates were liberalised. However, the shiny precious metal has not lost its importance, which it derives from the growing demand for this.
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Gold is very popular as a source of jewellery, especially in India and China, as it is an essential element for celebrations, festivals and weddings in these two countries, which strongly influence trends in the global precious metal market.
But it is also in high demad by central banks, which see it as a way of diversifying their foreign exchange reserves, and by institutional and retail investors, who see gold as a way of preserving the value of savings, and as a hedge against economic risks and market volatility.
For example, global demand for gold in the first quarter of 2021 was 815.7 tonnes, and more than half of that (477.4 tonnes) was for use as jewellery, according to data from the World Gold Council, which said that spending on gold jewellery was $27.5 billion, the highest quarterly level since 2013.
Investments in gold, gold coins and gold bullion rose to 339.5 tonnes, thanks to fears of accelerating inflation and the erosion of the currency's purchase value. On the other hand, central banks bought 95.5 tonnes, while technology companies used 81.2 tonnes in their electronic products.
Strong consumer demand covered outflows from gold-backed ETFs, which amounted to 177.9 tonnes in the first quarter of the year.
It is important t read about economic development and the difference between it and economic growth.
About the history of gold
The story of the discovery of gold goes back a long way, and historians and experts differ on the exact date, but it is confirmed that it was one of the first minerals known to man, thousands of years before our era.
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It is also believed to have been discovered in different places and times, with some civilisations knowing about it before others, and that it enjoyed (and still enjoys) a high status because of its brilliant form and rarity, and above all, its purity and ease of formation, unlike other minerals that are found as ore requiring processing.
Early civilisations associated gold with gods and rulers, as it was sought and used to glorify them, thousands of years before Christmas. At that time, gold belonged to the powerful and the common people, or was made into objects of worship, or used to decorate holy places, according to the website "Only Gold", which specialises in the trade and history of gold.
In the search for gold by the Phoenicians, Egyptians, Indians, Chinese and others, prisoners of war were sent to work in the mines, as were slaves and criminals. This happened at a time when gold had no value as "money", but was simply considered a desirable commodity in its own right.
Money first appeared in the form of gold coins around 700 BC, allowing the economies of the world to develop and prosper. During the classical period of Greek and Roman rule in the western world, silver and gold flowed to India for spices and to China for silk. At the height of the empire (98-160 AD), Roman gold and silver coinage predominated from Britain to North Africa and Egypt.
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After that, money became paper in the hands of the Chinese about a thousand years ago, an idea that the Italian explorer Marco Polo passed on to the Europeans in 1290, according to the financial portal "Argaam". Silver followed its course and evolved thereafter.
However, gold has not lost its lustre as one of the few precious metals, but it has come back to the forefront, as it was used as a hedge to value currency exchange rates in the period between the 19th and 20th century, before gold the norm disappeared completely between the 1930s and 1970s.
You may ask wha the history of gold has to do with what I want to "invest in gold"? The answer is simply that you need to know the importance and history of what you are going to invest in so that you know how important it is and has been for thousands of years and people care about it. Then you are in the right place because it will not come a day and gold becomes worthless or even that its price stabilizes for a long time.Every time a world crisis occurs, the price of this precious metal goes up because it is called a "safe haven". It is called a "safe haven" in economic crises. On this occasion you should read about economic crises and their history, and the most famous economic crises in history.
Is investing in gold profitable?
The group of investors and financial analysts differ in this, as some see gold as a way to immunise against the risks of stock markets and other volatile investments, as well as high inflation and uncertainty.
Fundamentally, they see gold as merely preserving the value of money from erosion, but it is not suitable as an investment tool because it does not generate a return, as do stocks, for example, which pay dividends on company profits, or bonds for which a fixed interest is paid.
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Such is the legendary investor Warren Buffett, one of the 5 richest people in the world, who refuses to invest in gold because it doesn't generate returns, and prefers to pour his money into corporate stocks, and wait for them to make strong returns. in the long run.
In a speech to his investor participants in 2018, Buffett compared the feasibility of investing in gold and stocks, saying that investing $10,000 since 1942 in US stocks would have returned $51 million now, compared to just $400,000 for the precious metal.
On the other hand, fans of the precious metal see it as an opportunity for capital gain by investing in it for the long term, i.e. buying gold and leaving it for a long time until its prices rise, then selling it, to profit from the difference between the buying and selling prices.
Gold preserves wealth when investors are faced with a depreciating US dollar and rising inflation, and historically gold has served as a hedge against both of these scenarios (a time when gold buyers waited to make gains).
As inflation rises, the value of gold generally rises, and when investors realise that their money is losing value, they will start to put their investments in an asset that has traditionally maintained its value. The 1970s was an excellent example of gold prices rising in the midst of high inflation.
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Factors affecting the price of gold
Like other commodities, gold is affected by supply and demand factors. The higher the demand, the higher the price. And if there are supply problems, such as a major mine malfunction or an announcement by a major company to cut production, this also leads to higher prices, and vice versa.
But gold as a global commodity demanded by everyone from small consumers to central banks and investment institutions is affected by many other factors, the most important of which is the price of the dollar, which is priced in some of the most important global markets.
Given this link to the dollar, the price of gold is directly affected by the interest rate in the US, and if the Federal Reserve (the US central bank) decides to raise interest rates, this negatively affects the value of gold, as it means additional strength for the value of the dollar, and encourages investors to pump their money into treasury bills which will increase the value of the commodity.
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As an investment tool, gold prices are affected by the performance of the stock markets, which are a rather risky investment (possible gain and loss).During periods when the stock markets rebound and their gains increase under favourable conditions and a clearly healthy investment climate, gold prices generally fall.
Inflation in general, in the US in particular, affects the price of gold, because higher inflation means lower purchasing power of currencies, and so investors buy gold to maintain the value of their savings, and here the price rises. But inflation can sometimes be a signal to raise interest rates at a later time, which can then negatively affect the price.
Also, geopolitical turmoil and the inability to predict what will happen in the future, due to a natural crisis (e.g. epidemic), are atmospheres that increase investors' fears, and in this case they turn to gold and other safe investments. They turn to gold and other safe investments to preserve some or all of the value of their investments. Of course, when investing in gold, it is important to take advantage of buying opportunities so that you can get a high return before economic or political changes occur that increase demand and therefore the price.
How to invest in gold
Investors can invest in gold through exchange-traded funds, or buy shares in gold mining and related companies, or even buy the physical metal directly in the form of gold bars or pounds, or buy future contracts for it and sell it later or hold until the metal is actually received, according to the forex blog site.
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Top tips for inves
in gold
Many senior investment advisers recommend dedicating a portfolio to commodities, including gold, to reduce overall portfolio risk.
Buying bullion is the most direct and popular way to invest in gold, but large bars can be difficult to sell, especially if the owner wants to sell some of their holdings.
Smaller gold bars and coins offer a greater layout and are very popular with gold owners.
The main problems with physical gold are that storage and insurance costs hamper the profit potential. In many countries there are special vaults to store gold, which costs customers extra money.
Investing in gold ETFs is a cheaper and easier way to invest in the precious metal, as it is similar to buying and selling shares.
Futures contracts are contracts to buy or sell a certain amount in advance at a certain date in the future, but the cost of these contracts is high and they require a high level of analysis of future trends, and are therefore suitable for very experienced investors.
Mining and refining companies benefit from high gold prices, and investing in their shares can be an effective way to profit from gold and carries less risk than other investment methods.
If the price of gold rises, the value of the shares of the companies associated with it may rise, in which case the value of the initial investment increases and eventually a person will receive a share of the profits of the issuing company.
Frequently asked questions about investing in gold
How to invest in gold online
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As mentioned, it is possible to invest directly in gold by acquiring the metal directly in the form of bullion, gold coins or even jewellery.
But investing directly in gold exchange funds or even company shares can be done more easily via online trading platforms.
There are ore common ways and products to trade gold online, so get familiar with them and see how to invest in gold at home.
Which is better... investing in gold or real estate?
gold
In some countries, like India in particular, investing in gold is the most popular option for families. This is because families cherish gold and pass it on to future generations as the main family asset.
The best thing about investing in gold is that it offers the most flexibility, for example, gold can be bought by the gram depending on how much you want to invest.
Depending on one's expectations and abilities can determine their investment in gold, and also when they want to recoup the amount invested, it is very easy to sell gold. This can be done in a matter of hours or even minutes.
Real estate
Investing in real estate should be approached correctly, with a good knowledge of the market situation and the type of property you are investing in. If available, property can provide a profitable and reliable type of investment that guarantees great returns in the long run.
Some of the other benefits of investing in property include the ability to create a regular income stream, tax advantages, risk reduction and diversification. Therefore, like gold, real estate is considered the best way for families to invest in certain countries.
Compare gold and real estate
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Size of investment
Real estate requires a huge investment depending on the price of the property you choose. You need cash easily to buy a property, and if you bought the property through debt financing, you have to bear the additional burden of paying the down payments.
Gold can be purchased even in small quantities depending on the amount you wish to invest and you can continue to add to your collection.
Investment period
Property investment will suit long-term investments with excellent returns, while investing in gold is ideal for both short-term and long-term investments.
earning potential
Property investment can give you a regular monthly income if you rent it out. You can also use the property to obtain a mortgage. The price of gold fluctuates and the value of your investment may fall depending on market conditions.
Liquidity
Real estate investment has less liquidity, as the seller needs days or months to sell the property, and the selling process is long and complicated with lots of paperwork and documentation. Buying and selling gold is a simple process that happens very quickly.
tax benefits
Investing in real estate offers tax benefits in the form of deductions for repairs, maintenance costs, depreciation, mortgage payments and legal services, while gold is subject to capital gains tax. Investing in a gold certificate of deposit is completely tax free.
Status of the individual
The choice between gold or real estate depends on your circumstances, the purpose of the investment and whether you are prepared to stay with real estate for longer to get more returns, or whether you want to take advantage of the greater liquidity by investing in gold.
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