How to Buy And Invest in Gold?

Buying and investing in gold has been a financial support system traditionally over years.

What are the Gold Buying Options in UK? 

You can buy gold either in physical or on paper. Physically you can buy gold coins, in the form of gold bullion, bars and jewellery and on papers one can buy EFT’s (gold exchange traded funds) and SGB’s (sovereign gold bonds). Other available options are gold mutual funds, one that invests in EFT’s and another in the international gold mining companies shares. 

Gold Jewellery

Owning gold in the form of jewellery has been a traditional trend. However possessing jewellery form of gold have certain issues like high costs, safety and of course the designs that get changed every now and then so it quickly becomes outdated. Besides all these, making charges are also very high.

Gold Coins

One can buy gold coins from jewellery stores, banks, finance companies and even the e-commerce websites. Depending on personal requirements and the amount one wish to invest there are 5 & 10 grams of coins available or if you like to invest more you can buy gold bullion which can measure as high as 20 grams. 

Gold bars & coins typically are of 24 karat purity and come in temper proof packaging. They’ll be hallmarked according to the BIS standards. Recognized Metals and Minerals Trading Corporation (MMTC) outlets, specified post offices and bank branches provide these coins. MMTC even offers buy back option for gold coins through its showrooms nationwide. 

Saving Schemes of Gold

There are two types of gold saving schemes: one that allows you to deposit a fixed amount for the chosen tenure every month. On the completion of the tenure you can buy gold from the same jeweller for the value equal to the total money deposited including bonus amount. The conversion is done at the prevailing price of gold on maturity.  Another option is investing in paper gold EFT’s. These investments occur on stock exchange (BSE or NSE) with gold as fundamental asset. Even the high initial buying and selling charges that goes into possessing jewellery, coins or bars gives an extra edge on the low cost EFT. Price transparency is another advantage.

All you need is a demat account and trading account with a stock broker. You may buy either in lump sum or through SIP at regular intervals. There are no entry or exit charges; however there are three costs that come with EFTs. 1>>Expense ratio for managing the fund, 2>> broker cost- every time you buy or sell gold EFT units and 3>> technically not a charge but impact returns. It occurs due to the fund expenses & cash holdings therefore not reflecting actual gold price. 

Another way of possessing paper gold is Sovereign Gold Bond. 

Decide whether you want to invest in gold for the purpose of a wedding or purely of investment. For investments you should not have more than 10% of the total portfolio in gold. Depending on how comfortable you are managing investments online choose between gold SGBs and EFTs and keep concerns like security & purity aside.

5 Good Reasons to Buy Gold

1.    History of holding value

Gold has consistently kept its value throughout the ages and is a way to pass on wealth from one generation to the next. It has been precious throughout history but wasn’t used as currency until around 643 BC. From an approximate value of $20.63 in 1929, to an approximate value of $1,302.50 in 2017, the value of gold has risen with the fall in the US dollar. As the dollar falls people turn to invest in the secure, physical gold; as shown between 1998 and 2008 where the price of gold nearly tripled.

2.    Inflation

Gold is a hedge against inflation in the long term because its value rises when the cost of living increases. Unlike money currency and stocks, gold prices soar during high inflation years hence it can serve as a relatively effective inflation hedge, usually accompanied by fears about the current state of the U.S. dollar and the global monetary system.

3.    Deflation

Deflation is a period in which prices decrease, business activity slows, and the economy is burdened by excessive debt. The global deflation, also known as the Great Depression of 1930s, saw the relative purchasing power of gold soar while other prices dropped significantly. Between 1929-33, overall prices fell 31%, yet gold’s purchasing power rose 44%; for even in a depression gold is still precious.

4.    Increasing Demand

An increase in wealth of emerging market economies boosts the demand for gold. Demand for gold has also grown among investors, as many are beginning to see commodities as an investment class into which funds should be allocated.

Synchronised global economic growth, shrinking central bank balance sheets, rising interest rates, insubstantial asset prices and market transparency are key trends which are ensuring gold is maintain its relevance as a strategic asset in 2018. 

5.   Decreasing Supply

Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008. At the same time, production of new gold from mines had been declining since 2000. Bullion prices are set to climb as a result, due to a lack of exploration and the global industry’s lack of replacing the reserves it has been mining.

All of these factors play a large part in the reasons behind why you should invest in gold. Whether it be to protect your current economic status or to increase your wealth, gold is a valuable, precious element that’s future holds promise and prosperity. For more information on gold bullion visit https://www.bullionforless.co.uk