There are investments that stand out over others and that are repeated over time: investment in gold, silver and precious metals in general is one of them goldco reviews. The gold rush is not new, indeed, it is not even from this century. You just have to think about how the Spanish conquerors succumbed in their search for El Dorado. But, currently, is it profitable to invest in gold in 2021? Why and how to invest in gold? We solve all your doubts!
Why to invest in gold and silver?
There are many reasons to buy gold and silver, but one of the most repeated is for their supposed safety. This metal acts as a refuge in times of crisis, since the price of gold tends to be more stable than that of other financial assets.
This does not mean that gold cannot fall, far from it: everything will depend on when you start investing. What happens is that in the long term its value has risen. In part, all of this is due to the fact that gold is closely linked to the price of the dollar, so that when the greenback suffers, gold rises, and vice versa. Something similar also happens with inflation. When the money in circulation increases, the gold also increases, only that it is between 6 and 9 months of delay.
Beyond its value as an investment and safe haven asset, gold is used in the jewelry and electronics industry, resulting in a constant demand for the metal. As it is a finite good, this causes its price to tend to rise.
If you do not have much knowledge about this matter, perhaps it is best to look for a financial advisor to help us get the best return on our investments. Therefore, in Finest we leave you a free tool in which you can find an advisor that adapts to your needs.
Advantages and disadvantages of investing in gold
Investing in gold and silver can be a good option to cover the risks of our investment portfolio, but that does not mean that it is not exempt from having its positive and negative points. These are the advantages and disadvantages of investing in gold.
Advantages of investing in gold
Among the benefits of investing in gold is its already mentioned stability, although there are others:
Saving in physical gold gives you an asset with total liquidity. You can sell it at anytime, anywhere in the world. It is the closest thing to physical money. Of course, it is possible that the sale price of gold does not always reach the purchase price.
Gold is not subject to political uncertainties.
It allows to diversify the investment portfolio.
A small amount can be of significant value, making it easy to store in the case of physical gold.
These are the benefits of investing in gold that have made it a safe haven asset and one of the first alternatives that savers look at when thinking about security for their money.
Disadvantages of investing in gold
Not everything is good, there are also dangers of investing in gold that we must know:
The investment is not insured. Do not be guided by words like refuge value and the like. The value of gold can go up and down, and that must be taken into account.
High correlation with the dollar, so that when the value of the bill falls, the dollar rises.
It must be kept in a safe place. This is especially true for physical gold, for which insurance may also be necessary.
How to invest in gold
The most common when thinking about investing in this precious metal is to buy gold bars or any other physical gold formula. The reality is that there are other alternatives to invest in gold and silver that have nothing to do with physically acquiring the material.
Each option has its advantages and disadvantages. The most important thing is to understand how they work and what we will get in each case. If you want to know how to invest in gold in Spain in the following lines you will see the options to buy this precious metal.
How to buy gold with financial products
Compared to investing in physical gold, there is the option of buying the precious metal or buying silver through different financial products. In this case, the commodity will generally be an underlying asset in which to invest.
These are the alternatives to invest in gold with financial products.
Investing in gold ETFs
The ETFs on gold have become an alternative to physical gold for investors more focused on the short term. Gold-traded funds try to replicate the performance of gold in the commodity market. It is one of the most reliable ways to invest in gold without buying the metal.
Here are some options for investing in gold with ETFs: Market Vectors Gold Miners Index ETF, iSHares Gold Trust
Investment funds invested in gold
Gold investment funds invest in gold and everything related to the gold market. For you to understand better, the fund manager will buy mining stocks and other businesses in the field of ore extraction, may invest in ETFs and other derivatives and in general will be more or less related to the price of gold, but will not replicate it directly.
In reality, it is a more diversified alternative to direct investment in gold, although it all depends on the objective being pursued. And it is that these investment funds invested in gold do not have that profile of safe-haven assets that physical gold does, in theory.
How to buy physical gold
From silver bullion to gold coins to 24 karat gold jewelry, 18K gold ... There is a whole world in the physical gold market.
Each of these options to save on physical gold has its peculiarities. This would be a short summary:
Gold coins
The value in this case is double. On the one hand, the gold with which the currency is made is revalued (in this case the percentage of the metal is crucial) and on the other, by the coin's own numismatic value. At this point there is no better or safer currency than another. From the American Eagles to the Napoleons to the South African Krugerrand, anything goes, it's a matter of choosing the one you like the most.
Each coin has its own value and price for the percentage of gold it owns and for what marks the gold coin collectors market.
Jewelers
Investing in gold jewelry is a similar alternative to numismatics. The big problem with jewelry is that its value is not always directly proportional to that of gold. In addition, here it will depend on the proportion of metal that they include and its quality. 24 karat gold is not the same as 18k gold.
Also, the good thing about jewelry is that you can always go down from gold to silver if the former is very expensive. What's more, this could also be done with any investment to save on physical gold.
Physical gold with gold and silver bullion
This is the most common option in this section and to a certain extent the most recommended. It basically consists of buying a gold or silver bar to keep it and sell it when the time comes.
The big problem with investing in physical gold is its storage, especially when it comes to bullion. And it is that depending on the piece (it usually has 31.1034768 grams) its value will exceed 6,000 euros for the gold ingot and 250 euros for the cheaper silver ingot. If we had that money at home, you would surely hide it well and not all in one place. You should do the same with gold bars and silver bars.
As a solution to this problem, platforms such as Lingoro, Ciode or IGR Spain have emerged that take care of the entire process. That is, buy the bullion, save it and sell it when the time comes. In this case we would be owners of physical gold, only you would not have it at home or in your bank safe.
One of the advantages of investing in physical gold is that investment gold is exempt from VAT. This applies to bullion, which when considered an investment will not face VAT, as neither does an investment fund, an ETF or any other financial instrument. This exemption does not apply, for example, to the purchase of gold coins or silver and gold jewelry. These products will be taxed with the corresponding VAT of 21% or with the Property Transfer Tax if they are acquired in the second-hand market.
Is it a good time to invest in gold?
Gold has a clear cyclical component. It performs better in phases of high inflation or when the dollar depreciates. In the same way, it also tends to rise when there is fear of a recession or economic stagnation, as well as when there are sharp falls in the stock market.
The same happens throughout the year, there are months in which the price of gold rises and others in which it falls. In other words, it is better to buy gold at one time of the year than another.
In this sense, the first months of summer are usually conducive to entering the gold market. The following graph produced by Bullion Vault shows the monthly evolution of gold, silver and platinum for the last 20 years.