Types of gold investments: what you should know

By Binomo

Jul 9, 2022

Level: Beginner

Reading time: 4 min

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The rapid onset of the pandemic led to an increase in gold prices to a record level in 2020, but even now the demand for the precious metal isn’t falling.

While analysts are arguing about how gold quotes will change further, many people all over the world are thinking about buying it and looking for the best way to invest in gold.

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How can I invest in gold?

At the moment, most of the global gold, or about 8 thousand tons, is stored in the USA. Germany takes second place. The largest amount of gold jewelry exists in India, and the largest personal gold reserve is held by one of the royal families in the East.

Gold is the most ‘marketable’ metal on the world market. For this reason, it’s much easier to work with it than with other precious metals.

However, if we don’t go into the details of the complex market instruments, which are usually used by large companies, there are not too many options for individuals. Among them it’s worth noting:

independent purchase and subsequent sale of scrap or gold in the product;
opening a mutual fund account;
contribution to the MMI is an anonymized metal account;
ETF;
gold futures.

Each of these tools is used according to a certain principle. None of them guarantees a profit. When buying gold as an investment, it should be understood that a lot depends on market trends. Therefore, under certain circumstances, an investor may face losses.

Investments in gold by purchase and sale

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There are various forms of investment in gold, one of which is the simple process of buying and selling it. It’s the easiest way, which requires less specialized knowledge from the investor than certain other methods. Legally, gold can now be purchased in banks, pawnshops, jewelry stores, antique outlets, and a dozen other places.

The mechanism of how to invest in gold for beginners:

The investor buys gold — scrap, coins, and jewelry.
After some time, the acquired gold is sold — there are many legal ways to sell it.
The difference goes to the investor in the form of net profit.

At first glance, the simplest scheme may involve significant profits for the investor, but you need to be aware of the latest market trends, and not rush to sell your assets off at the first opportunity.

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Investing in gold in an ETF

Another investment tool is an ETF. This abbreviation stands for Exchange Traded Fund. This is practically the same as mutual funds. Here are their main features:

collective investment in the acquisition of material goods;
purchase of shares (units);
transfer of authority to the management company, which is an experienced exchange player;
making a profit on commission payments;
risks of a total loss of invested funds.

An ETF is a safer and more profitable option for investing in gold. For novice users, it can be a good start for successful investment activity.

Jewelry as an investment

Some ways to invest in gold may seem too complicated and confusing to inexperienced beginners, so we decided to tell you about an option that may seem least intimidating to most people.

In recent years, there has been an increased demand for jewelry in the world, especially in developed countries. At the same time, it’s important to understand that not every gold jewelry item is slated to rise in price, and mass-produced jewelry cannot be considered a profitable investment.

As a rule, the main reasons come down to the fact that for common jewelry, the trade margin is higher than the real value of the precious metal, and the quality of raw materials used in production does not always correspond to the proper proportions of the precious metal.

The following categories of jewelry can be considered investment attractiveness of investments:

Items with large precious stones. The weight of pure gold in such jewelry starts from one carat.
Jewelry with historical value. It takes decades to recognize the possible value of an asset.

Growing your investments when buying gold jewelry is possible. At the same time, it’s worth remembering that investments require a long-term commitment from the investor (10-30 years) and a high entry threshold (>$5,000).

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