WAYS OF INVESTING IN GOLD
Investing in gold is exciting because of the
unusually large number of ways you can purchase gold in
today's market.
You can invest in physical gold by buying gold
bullion bars, coins or medallions -- some of which sell
for less than $25. Or you might want to use your credit
card to buy a bank's gold certificate that represents
your ownership of gold and is redeemable on sight. Or
you can start a gold accumulation program for as little
as $100. If you feel more at home with stocks, you might
want to consider shares in companies that mine gold.
There are also mutual funds, and more speculative gold
futures contracts and options --- and many more.
Your very own gold bar!
Many investors prefer to take physical possession of
their gold in order to have tangible control of their
asset. Pride of ownership moves other investors to have
their gold within reach so that they may display it to
friends or admire it in the comfort of home.
If you like the idea of taking physical possession
of gold you may want to buy the metal in the form of gold
bars or privately minted coin-like medallions.
The standard unit of gold in international trading
is still the 400 troy ounce (12.5 kilogram) bar with a
fineness of 995, referred to as a "London Good Delivery
Bar". One troy ounce is equal to 1.09714 regular ounces.
The purest gold of 999.9 fineness is used in the making
of smaller bars.
Gold bullion bars are available in at least 19 sizes
and weights ranging from a tiny one-gram bar and pocket-
sized kilobar (32.15 troy ounces) to the large 400 troy
ounce London Good Delivery Bar. This variety offers a
wide spread in gold bar prices -- running from under $20
to $140,000 -- providing opportunities for even the
smallest investor.
In addition to the advantages connected with having
gold under your own control, there are several other
reasons favoring investment in gold bullion bars. For
example, commissions on the buying and selling of bullion
bars are minimal. You will find it easy to sell gold
bullion bars bearing the names of reputable refiners.
And prices are quoted throughout the world.
Gold bullion may be purchased from precious metals
dealers, precious metals exchange companies, major banks
and many brokerage firms.
Gold Coins - The Universal Treasure
Gold coins have fascinated the world's investors for
over two thousand years.
Many ancient gold coins are both rare antiquities
and miniature works of art. They are bought and sold as
individual items within the coin collecting (numismatic)
community at prices well above the value of their gold
content.
There are also many modern gold legal tender coins
that are frequently very beautiful and are issued in
limited quantities to commemorate events or persons of
national importance.
Gold Bullion Coins are the "Gold Coins" of the investing
public
Although many numismatic gold coins have been
purchased by investors, most investors think of gold
bullion coins when they think of investing in "gold
coins". And bullion coins are favored by many investors
who want physical possession of their gold.
The popularity of these coins and privately minted
coin-like medallions can be attributed to their small
size, convenient weights, and easiness to store.
The "typical" gold bullion coin is legal tender of
a nation and its gold content is guaranteed by the
issuing nation. It bears a face value that is largely
symbolic because its market value depends totally on its
gold content.
If you invest in gold bullion coins, or in privately
issued coin-like gold medallions, pieces, or "rounds", it
will be easy for you to keep track of the daily value of
your holdings because many of the most popular gold
bullion coins and medallions contain one troy ounce of
pure gold. And the price of one ounce of gold is
reported daily in most newspapers.
Other bullion coins have been minted in easy
fractional weights such as 1/2-ounce, 1/4-ounce, and
1/10-ounce. Among the countries issuing bullion coins
are South Africa, Canada, Mexico, China, Great Britain,
and the United States.
Bullion coins normally sell for a 3 to 15% premium
over the bullion value of gold, but a large part of this
premium may be recovered at resale. The premium of gold
coins is justified by their ready divisibility,
convenience, portability and marketability.
Bullion coins and privately minted gold medallions
can be purchased at selected banks, precious metals
dealers and brokerage firms. You can also buy them at
coin dealers and jewelers. Smaller bullion coins are
becoming increasingly popular as investment jewelry.
If You Don't Want Physical Possession of Your Gold...
If, as an investor, you value convenience and speed
over physical ownership of gold, you may prefer to invest
in gold certificates, accumulation plans, futures
contracts, options,gold mining shares, or gold funds.
Gold Certificates Are Easy to Buy and Sell
A gold certificate provides you with an attractive
alternative to investing in physical metal.
Issued by many banks, gold certificates obligate the
issuer to deliver a stated quantity and fineness of gold
to the buyer in accordance with the issuer's terms and
conditions.
With a gold certificate, the investor's exposure to
gold is identical to bullion, but has the added advantage
of providing convenient storage. Since many financial
institutions issue certificates in fractional amounts,
you have the opportunity to invest in convenient dollar
amounts.
Certificates are also easy to buy and sell. Some
major banks will even accept your credit card purchases
by telephone. By buying a certificate, you receive
certain other benefits. You don't pay any fabrication
charges. There are no delivery charges. While your
bullion is on deposit, insurance coverage will be
maintained. You don't have to ship the bullion back when
resale is desired.
Your bullion position and the approximate current
value will appear on your regular statements so that you
will always know what you own. And since your
certificate is an obligation of the issuing institution
to deliver gold, you may exchange your certificate for
the underlying gold at any time, or sell the certificate
through the issuing institution.
Gold Accumulation Plans -- Economical Way of Enjoying
Ownership
The gold accumulation programs offered by many
precious metals brokerage firms allow the investor to
enjoy all the benefits of investing in gold without the
responsibilities and costs of handling and storage.
With accumulation programs, you sometimes need as
little as $100 to be able to start buying gold. And once
you have opened your account with a reputable brokerage,
you can add to your investment in amounts as small as $50
or as large as $5,000.
Buying gold through accumulation programs can
provide you with a number of advantages. You can make
purchases at any time. Your order will be combined with
other orders received that same day, and will be executed
the next business day. Since your brokerage house or
bank buys and sells in the wholesale bullion dealer
market, you are assured of competitive prices.
Because you are investing by the dollar amount and
not by the ounce, your purchases are made in whole or
partial ounces. And you pay discounted commission rates
that are up to 40% less than a regular broker charges on
transactions.
Your gold is stored in major depositories and is
fully insured. Your record keeping is done for you, and
you will receive a confirmation of each transaction and
a periodic summary statement. While you leave your gold
in an accumulation program, you do not have to pay state
or local taxes.
You can liquidate your accumulation plan holdings at
any time. And when you do decide to sell, you will avoid
paying costly assaying fees for weight and purity
testing.
In a separate section we discuss GoldPlan, a Swiss
gold accumulation program which combines these advantages
with traditional Swiss secrecy.
Gold Futures Contracts and Gold Options
Gold futures contracts were originally designed to
help industrial users to protect themselves from adverse
fluctuations in the price of gold.
Like futures contracts for other commodities, when
you buy a gold futures contract you promise to purchase
or sell a specified quantity and grade of gold on a given
date for a certain price.
In the case of options, you do not promise to buy,
but you do have the right to buy gold at a fixed price on
some future date.
Through expert use of "leverage" -- the difference
between the margin (capital invested) and value of the
assets controlled by the contract -- profit potential can
be very high.
However, the risks are just as high, or higher for
those who are not schooled in the intricacies of options
and futures contracts. You should discuss futures
contracts and options with a trusted, experienced broker
before investing in these, the most speculative ways of
participating in the gold market.
