Investing in Gold

In recent years, advertisements for investing in gold can be heard on the radio and seen in magazine ads. Is investing in gold a passing fad? Or should we give gold a second look?

Gold is typically considered a high-risk investment. Due to its risk factor, it is advisable to let investments in gold make up only 5-10% of the overall investment plan. Consider investing in gold for long-term growth as well as for short-term speculation. A good time to consider investing in gold is when the economy is volatile. Because we have been experiencing a shifting economy, it might be the time to invest in gold. It is an attractive way to diversify a portfolio.

As the value of the dollar falls, gold benefits. Gold and the dollar are inversely related. Any weakness in the U.S. dollar should cause an increase in the U.S. dollar gold price as long as the international gold price remains relatively constant. The price of gold is driven by supply and demand and by speculation.

Investing in gold doesn’t necessarily mean stock-piling bricks of gold in a safe. Jewelry actually consists of over 2/3 of the world’s demand for gold. Gold can be purchased in the form of coins, bars, certificates and exchange-traded products (ETP). ETPs allow you to participate in the gold bullion market without the necessity of taking physical delivery of gold. You can buy and sell gold through the trading of a security on a regulated stock exchange. Typically a commission of 0.4% is charged for trading in gold ETFs and an annual storage fee may be charged.

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Gold is priced twice daily (10:30am and 3 pm) through the London gold fixing which is done by the five members of The London Gold Market Fixing Ltd, on the premises of N M Rothschild & Sons. It serves as a benchmark for pricing the majority of gold products and derivatives throughout the world’s markets.