Is it worth investing in gold?

Gold as an investment opportunity has long been a hotly debated topic. But which side should you listen to and what is the best way to invest in gold?

Why gold?

Gold has been a trustworthy investment option for thousands of years. Typically, two benefits attract people to gold – it’s seen as a safe haven against economic volatility, and it’s utilised as a hedge against the US dollar. The benefits of gold were most recently evident during the financial crisis. The value of gold rose as currencies fell down under the market pressure.

In addition, gold is a good, stable investment option because it is liquid. This means it is easy to sell and buy gold. Therefore, investing can offer long-term security and you don’t constantly need to keep an eye on gold prices.

 

Is there a downside to gold investment?

Keep in mind that gold’s valuation is dependent on investor sentiment. Although gold is a valuable metal – with its relatively rare nature maintaining it as a valuable commodity - it is still dependent on this investor appreciation.

The price of gold has also been subject to volatility, albeit a lot less frequently and less severely as general markets and other specific commodities. Generally, the price of gold trends downwards at the start of the year and upwards towards the end, broadly following seasonal trends driven by demand.

Despite the relative security of gold, some famous investors, including Warren Buffet, believe gold is not able to provide enough return for your investment.

 

What are the best investment options?

Gold can be a great way to diversify your investment portfolio. It is a good idea to invest a small percentage of your savings in gold. When you are about to invest in gold, you have to pick between different options. Typically, the choice is between physical gold and different gold shares and funds.

 

Physical gold

Most analysts agree that physical gold is always the safest investment option. There are two main types of physical gold investment opportunities: bullions and coins. You can buy both through traditional dealers and there are reliable online options available as well.

The Daily Telegraph notes that one of the best aspects of investing in gold coins is their tax-free status. If you purchase the Royal Mint’s gold coins and decide to sell them at a profit, they qualify as legal tender and are therefore free of capital-gains tax.

In addition, buying investment-grade gold bullions as an investment is also stamp-duty free, as well as VAT exempt. This gives gold a big advantage over investing in stocks and bonds.

 

Funds and investment trusts

You could also choose to invest in gold through different funds and investment trusts. Although these options might provide a bigger return for your investment, they tend to carry a higher risk to investing in physical gold.

If you want to invest in these funds and trusts, then it is always good to diversify and invest in a few different options. This can help guarantee you don’t lose all of your initial investment should the market hit unexpected turbulence.

You shouldn’t make gold your only investment interest, but it is a good option for diversifying your portfolio, and physical gold can be a great option to choose.