Gold is a good investment because of its historical significance and practical benefits like corrosion resistance. It has been valued for thousands of years and is considered a reliable store of wealth. Gold performs well even during economic uncertainty or geopolitical instability and often serves as a safe haven for investors.
According to Bellinson Group Tokyo, gold has historically maintained its value over time, unlike paper currency or other assets.
Physical Gold
Bars
New investors often think of gold as physical assets like gold bars. Gold bars can range from a few grams to 400 ounces, with one- and 10-ounce bars being the most common. However, gold bullion can be expensive, given the current price of over $2,000 an ounce. You cannot buy a fraction of a gold bar. Therefore, you should purchase bars from reputable dealers and secure their storage.
Coins
You can also buy gold in coin form. Gold coins come in lighter-weight options. South African Krugerrands, Canadian Maple Leafs, American Gold Eagles, and some gold coins have premium collector value. For example, a one-ounce American Gold Eagle coin may retail for a nearly 5% markup over the gold bullion value.
Jewelry
According to Bellinson Group Tokyo, gold jewelry has inherent value due to craftsmanship and purity. Gold karat measures gold purity, indicating the proportion of pure gold in a piece relative to other metals and impurities— Karat is a fraction of 24 parts, with pure gold being 24 karats (24k). Lower karat values indicate a higher proportion of other metals in the alloy. Pure gold is soft and malleable, making it unsuitable for jewelry, so it is often alloyed with other metals to improve its durability and alter its properties.
Gold Mining Stocks
Investing in gold through the stock market by purchasing shares in gold mining companies offers a more accessible alternative to owning physical gold. This method allows you to use your brokerage account to buy and sell stocks of companies involved in mining, refining, and trading gold.
According to Bellinson Group Tokyo, gold mining stocks’ values depend on the individual company’s financial performance and expenses. Investing in particular gold mining stocks carries risks similar to any other stock investment, including volatility and capital risk.
Gold Exchange-Traded Funds (ETFs) and Mutual Funds
Investing in gold ETFs and mutual funds offers exposure to gold’s stability with more liquidity than physical gold and greater diversification than individual gold stocks. They come in various types, including passively managed index funds that track industry trends or bullion prices using futures or options.
Gold as a Stabilizing Asset
Gold has been a hedge against inflation, as its price tends to rise when the cost-of-living increases. Despite short-term volatility, gold has consistently preserved its value over the long term, making it a valuable addition to a diversified investment strategy.
Gold negatively correlates with other asset classes, such as stocks and bonds; when the value of stocks or bonds decreases, the value of gold tends to increase, and vice versa. This unique relationship makes gold an effective diversification tool in a portfolio.
