If you are wondering whether there is still time to get in on the new gold rush, the simple answer is yes. Gold has seen a tremendous surge in value over the past few years, and the market is still bullish. The gold situation is far different from other investments, and most financial analysts recommend adding precious metals to nearly every portfolio.
Ample investment opportunities exist, and consumers can buy gold in multiple ways. Current market conditions are favorable, and most experts predict gold’s value to increase for the foreseeable future.
Growing Asian Demand
Gold is a constant commodity and is not subject to the fluctuations of fiat money. Fiat money is paper money that is issued by a government. The U.S. dollar is one example of fiat money, and there are several problems associated with this style of currency. The dollar has no intrinsic value and is only worth something because it is generally accepted.
China has a lot of dollars because of the huge trade deficit. The country is currently concerned about its financial position and is buying up as much gold as possible. Seven leading countries own most of the world’s gold, and these nations have an agreement that prevents sales over a certain amount. China is buying as much gold as possible, and this should keep prices high for some time.
Jewelry and Industrial Demand
In addition to investor demand, gold prices are also influenced by jewelry and industrial demands. Most of the gold that is currently mined is used in jewelry production. Estimates show that nearly 90 percent of annual mine output goes directly to the jewelry market. This leaves less material for investors and ensures that prices will remain high. For this reason, right now is one of the best times to buy gold.
Another great thing about gold is that investors have several options for how to purchase and hold the material. Old coins are one option, but these are more of a collector’s item than anything else. In addition, investors need to hold on to rare coins, and this is a big liability.
There is an alternative, and many of the world’s governments make their own gold coin. The Canadian Maple Leaf, American Eagle, and South African Krugerrand are a few of the coins that are minted by the respective nations. These coins can be purchased from retailers and contain a known amount of gold.
Buying stocks in a gold mining company is another option. These mines usually own a known quantity of gold and bring a set amount to the surface each year. As the value of gold continues to rise, mining companies will see their stock prices increase. Investors can benefit from this type of stock purchase because there is no liability associated with holding on to the physical gold.
Exchange-traded funds (ETF) are another way to make the most of the current gold market. These are large mutual funds that allow investors a chance to purchase gold and not worry about storing precious metal. Mutual funds are a great way for investors to take advantage of today’s market, and there are several benefits.
The funds are managed by skilled financial professionals who are in tune with the specialization in today’s market place. The funds are affordable, and many can be had for an initial investment that is as low as $1,000.
The funds are also ideal because they use a multi-faceted approach to investing. Many portfolios include a variety of mining company stocks, coins, and bullion. These reduce the risks associated with a single type of gold.
How Will The Falling Gold Prices Affect My Wallet?
Investing in gold has long been held to be a safe bet against economic instability and inflation primarily due to the fact that it is a tangible asset and because it is superior at holding its value compared to other investment-worthy assets. In the first quarter of 2013, however, the value of gold dropped nearly 25%, which is the biggest short-term decline since 1982, when the price of gold plummeted 18% over one quarter.
In August 2013 the world’s largest gold producer, Barrick Gold Corporation, announced an enormous plunge in profits for the second quarter, forcing the company to sharply reduce dividends and cut back on operational spending. Barrick Gold Corporation is not the only casualty of declining gold prices.
How has gold performed in the past four decades?
The World Gold Council provides a statistical history of gold prices in U.S. currency since early 1970. At that time gold was worth $35 per ounce, which would equal $210 today when adjusted for inflation. Gold prices reached an all-time high of almost $1,900 per ounce in early September 2011. Exactly ten years prior (in early September 2001), the price of gold per ounce was at $274.
Historically, gold prices reach the $275 mark in July 1979 and remained fairly consistent between that value and $420 per ounce until mid-2005, when it began an incline that was noticeably dramatic when compared with the previous values over nearly four decades. From mid-September 2011 to early April 2013, the price of gold bounced between $1,500 and $1,800 per ounce but at the end of the first quarter of this year, the price has been on a progressively downward spiral.
What has contributed to dropping gold prices?
According to some industry experts, some contributing factors to the drop in gold prices are a slowdown of economic growth rates in emerging markets such as China and India, which are both substantial purchasers of physical gold. There are also concerns among investors regarding the Federal Reserve cutting back on policies fueling economic stimulus, and inflation rates have not been markedly dynamic, both of which undermine the value of gold as a hedge against rate spikes.
What trends do experts see for the future of the gold market?
Stephen Feldman, chief executive of Gold Bullion International, believes that the price of gold will increase substantially over the short-term and continue to rise because the supply of mined gold has dwindled while the worldwide demand for physical gold remains strong and global banking institutions seek ways to diversify their financial reserves.
Some experts maintain that the dramatic decline in gold prices is but a passing fad and that the value will rise quickly over the next three to five years, possibly surpassing its previous all-time high. Other experts cite the economic environment following 2008’s recession as an indicator that gold prices will soon boom again as they did precede the 2011 price peak.
What impact will this have on your investments in the gold market?
There are three sides to be considered. The “sell now” side urges offloading before the bottom drops completely out of the gold market, the “buy more” side recommends snatching up as much of the physical supply as possible because prices will be making a dramatic turnaround and the fence-sitters who quietly hold on to their investments or sell off a fraction of their portfolio while hoping for the best.
As for the immediate future, signs are pointing to a continued decline in prices which does lend credence to recommendations to sell now while you can still recover some profits from your initial investments.
Short Gold ETFs No Longer a Safe Haven
Over the last few months, the gold market has been through a rather rough time, with values falling significantly since the start of the year, leading some investors to be wary of the once “precious” metal. The market may be due for another rally, but in the short term, at least, short traded gold ETFs are not appealing to many investors.
Traditionally, gold has always been a sure thing. It enjoyed a bull-run which lasted more than a decade, before experiencing its biggest fall in value for 30 years in April this year. After that fall, gold saw its value rise again, but last week it fell once again to its lowest level in three years.
Short Term Investments
For many investors, this fall was a warning signal. All markets are wary right now because of the prospect that the Federal Reserve might decide to set a date for the end of the U.S. stimulus program. While that is good news in some ways, because it would be a response to positive economic data, it would destabilize many economies. Given the situation with sovereign debts in many parts of Europe, that is the last thing that investors need.
The idea of short ETF investing was appealing to many investors because of the relatively safe nature of the economy. If you can call any short ETF a “safe haven”, then gold would be the one to think of that way. Unfortunately, the market is now too volatile for many investors.
An Uncertain Outlook
Ole Hansen of Saxo Capital Markets said that investors were nervous about the potential for losses in the newly volatile market. The outlook for gold is still uncertain. The commodity is affected both by inflation and by the industrial markets. Some brokers expect to see gold fall to $1150 or lower before a rally occurs. What the next support will be is unknown, but it is generally agreed that falling gold prices will be the trend for a while yet.
The good news for savvy investors, however, is that you can use the short ETF to take advantage of the volatility in the market. There is a large spread between the bid and ask price on small ETFs and this is something that investors must be aware of, however, if traded wisely, a short ETF could produce large returns.
Shorting gold through an ETF or a CFD on one of the major long ETFs is a risky strategy. The potential rewards are large, but it is not something that an inexperienced investor should attempt. If you are considering trying to short a major commodity, check your funding costs and the spread carefully.
It does not take a lot to wipe out your gains. It’s also important to note that the Bank of England and the ECB have both stated that they don’t expect to tighten monetary conditions in the near future, so the current price correction could be an over-reaction to a problem that is not yet upon us.
Devaluation, Diversification And Precious Metals
Buying silver and gold is a treasured pastime for millions of Americans. Today, it continues to be one of the leading investment options. This may be because of the continually increasing value of both silver and gold coins. An increasing number of new investors are looking into the benefits of diversifying with precious metals. It may be difficult, however, to know where to start.
There are many credible places where you can buy precious metals like gold, silver, and platinum. Keep in mind these essential tips when purchasing silver and gold online, from the bank, or from a precious metals dealer.
Do your research
Doing your research is absolutely essential in order to prevent an investment tragedy. Not only do you need to understand what you are purchasing, but you need to know if the piece is accurately priced.
For example, if you are purchasing a 1 oz. American Eagle gold coin, you should pay a few dollars over the current spot value, or market value. While the price will often change several times over the course of a day, it is important to ensure that you know what you are paying is accurate.
2. Consult with an experienced financial advisor if you have any investing questions
While investing in precious metals is a big decision to make, consulting with a reputable professional will ensure that you are putting your money in the best place for your personal situation. A financial expert can help to educate you on all of the options that are available.
3. Shop Around
There are many different ways of purchasing gold and silver, including dealers, banks, and online websites. Depending on what form of gold and silver you are purchasing, banks may offer a lower markup rate than gold coin dealers. There may also be independent dealers that will compete to match rates as well. Be sure to shop around before committing to a purchase.
4. Get an appraisal
You may want to get an appraisal on your piece by an independent appraiser like GreatSouthernCoins.com. Often times, dealers will inflate the value of their gold and silver pieces.
5. When buying bullion, it is best to have them delivered to you by an authorized facility
This will help to ensure that the bullion you are getting is certified and authentic. Also, make sure to store your own gold bullion and do not store them in another facility. This will affect the resell value of the bullion.
6. Research the reliability of the company
Check out the authenticity of the company you purchasing your gold and silver from. By entering the company’s name in an online search engine, you can pull up client comments and other important information about the company. You can also contact the local Consumer Protection Agency, and the state Attorney General to see if there have been any complaints made against the company.
When buying gold and silver, you need to be well aware of each detail of the buying process. By following a few simple tips, you will get the best value for your investment in precious metals.