Getting Money Wise: How to Invest In Gold

How to Invest In Gold

Posted by abra-ka-dabra | Monday, November 23, 2009

Gold Bubble, gold bullion, How To Invest

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GOLD prices have sky rocketed to a huge extent in the past few months.So much so that GOLD today powered to a record high of $1,161.80.The GOLD movement has been phenomenal so to speak.A lot of this might have to do with growing worries about inflation and a drop in U.S. stocks that stirred doubt about the economic outlook.

GOLD in its physical form has been the most important precious metal.A lot of occasions are not complete without purchase of GOLD and GOLD enjoys a lot of value proposition as a gift.

But, with the high prices and a lot of knowledge needed to buy quality GOLD , it is difficult for small and medium time investors to add GOLD to their Investment Portfolio.

In my last post discussing the High Prices Of Gold , i had pressed for the desire to learn various investment vehicles which can help us in allocating a part of our investment portfolio for GOLD based investments.

Here is a comprehensive list of How To Invest In Gold,

SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
The significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy and the United States.
Not suited for Small and Medium term Investors

FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
China launched its first gold futures contract on January 9, 2008. Several other countries, including India, Dubai and Turkey, have also launched futures exchanges.
These are much like the Futures & Options(F&O) in Stock Markets.
Suitable for traders/speculators with technical know how to make money by trading.
 BARS AND COINS
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a small premium for investment products, of between 5-20 percent above spot price depending on the size of the product and the weight of demand.
This is the orthodox way of investing in GOLD.Investors can either buy coins from retail shops or banks.A lot of banks in India are providing the options to invest in Gold Coins
EXCHANGE-TRADED FUNDS
Continously rising  gold prices has  attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.

This is the most interesting and viable option for a small and medium term investor for increasing exposure to GOLD. Gold ETF's work mostly like Mutual Funds and can be purchased similar to stock market transactions.The fund corpus is used by the AMC to invest in GOLD based products.Based on the price of GOLD and trading volumes , a NAV is assigned to the ETF

This is the probably the best gold based investment according to me.For small and medium term investors having a limited corpus, GOLD based ETF's provide the option of purchasing in phases and also help take the advantage of volatility in the prices much like Sytematic Investment Plans
All said, GOLD is trading at a very high price right now which makes it a little less lucrative.Such high volatility can give rise to a GOLD bubble formation which can be very risky.
I am going to consider investing in Gold based ETF's when the prices cool off a bit.There is a comprehensive list of GOLD based ETF's in India here .
I will hopefully try getting to the fundamentals of how GOLD prices work and what are the key price drivers when it comes to GOLD based products.Watch out this space for some fundamentals on GOLD based investments.

Have you invested in GOLD based products? What factors do you consider before making investment? Please share your thoughts here

Img Credit: Reuters

Ankit is an Oracle Technical Consultant By Profession and passionate about Indian Business and Finance.Besides this blog,he also writes at Ankit@trakin .He is a student of Web 2.0 and loving it.He loves conversations on anything and everything.You should follow him at @ankit_a for micro-conversations or mail him at hatsoffforu [at] gmail [.] com

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How to Invest In Gold

GOLD prices have sky rocketed to a huge extent in the past few months.So much so that GOLD today powered to a record high of $1,161.80.The GOLD movement has been phenomenal so to speak.A lot of this might have to do with growing worries about inflation and a drop in U.S. stocks that stirred doubt about the economic outlook.

GOLD in its physical form has been the most important precious metal.A lot of occasions are not complete without purchase of GOLD and GOLD enjoys a lot of value proposition as a gift.

But, with the high prices and a lot of knowledge needed to buy quality GOLD , it is difficult for small and medium time investors to add GOLD to their Investment Portfolio.

In my last post discussing the High Prices Of Gold , i had pressed for the desire to learn various investment vehicles which can help us in allocating a part of our investment portfolio for GOLD based investments.

Here is a comprehensive list of How To Invest In Gold,

SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
The significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy and the United States.
Not suited for Small and Medium term Investors

FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
China launched its first gold futures contract on January 9, 2008. Several other countries, including India, Dubai and Turkey, have also launched futures exchanges.
These are much like the Futures & Options(F&O) in Stock Markets.
Suitable for traders/speculators with technical know how to make money by trading.
 BARS AND COINS
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a small premium for investment products, of between 5-20 percent above spot price depending on the size of the product and the weight of demand.
This is the orthodox way of investing in GOLD.Investors can either buy coins from retail shops or banks.A lot of banks in India are providing the options to invest in Gold Coins
EXCHANGE-TRADED FUNDS
Continously rising  gold prices has  attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.

This is the most interesting and viable option for a small and medium term investor for increasing exposure to GOLD. Gold ETF's work mostly like Mutual Funds and can be purchased similar to stock market transactions.The fund corpus is used by the AMC to invest in GOLD based products.Based on the price of GOLD and trading volumes , a NAV is assigned to the ETF

This is the probably the best gold based investment according to me.For small and medium term investors having a limited corpus, GOLD based ETF's provide the option of purchasing in phases and also help take the advantage of volatility in the prices much like Sytematic Investment Plans
All said, GOLD is trading at a very high price right now which makes it a little less lucrative.Such high volatility can give rise to a GOLD bubble formation which can be very risky.
I am going to consider investing in Gold based ETF's when the prices cool off a bit.There is a comprehensive list of GOLD based ETF's in India here .
I will hopefully try getting to the fundamentals of how GOLD prices work and what are the key price drivers when it comes to GOLD based products.Watch out this space for some fundamentals on GOLD based investments.

Have you invested in GOLD based products? What factors do you consider before making investment? Please share your thoughts here

Img Credit: Reuters

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