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 $40 to $200,000,
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 $200 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 $100 or as large
as $10,000.
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 œdollar 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.
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.
