If you’re wondering how to invest in gold, then you’ve come to the right place. In this article, we’ll talk about the methods, pros and cons and what to expect in general.
Both the average person and the billionaire are able to make money on the stock market. If you do your research on stocks right, you can ensure huge gains for yourself. By looking into factors such as performance, changes in profit margins and debt/equity ratio, you’ll be able to anticipate which stocks are about to rise in value. You don’t have to invest 100k if you’re interested in investing in gold. Smaller investments are ok.
However, at the end of the day, the stock market still carries a lot of risk. No matter how careful you are, it’s very sensitive to factors that are outside your control. We’re talking about shifts in the economic and political landscapes.
In comparison, gold is more stable. It retains its value even during times of great instability. In fact, when the stock market experiences a downturn, gold prices typically spike up! As a result, it’s a great instrument for diversification and to hedge against inflation and deflation.
The only trade-off is that you typically can’t expect huge gains from investing in gold. While gold retains its value it takes a long time for it to increase. As a result, it’s more an instrument for stability than for making lots of money.
Best Ways To Invest in Gold in Australia
There are three different ways for Australians to invest in gold:
- Physically purchasing gold
- Stakes in mining companies
Each has its own pros and cons, and different levels of risk.
1. Physically Purchasing Gold
The most obvious method is to own a physical asset made of gold. These include items such as coins, bullions, jewelry and more. There are plenty of gold dealers in Australia (including online) so it’s very easy to make a purchase. The downside here is that you have to find a way to securely store these gold assets. Certain gold dealers provide storage facilities but they’ll still charge a fee for it.
When purchasing jewelry, you have to be careful about other things that add value. For example, factors like the design shouldn’t really account a whole lot for its value. Try to buy as close to the market value of gold as possible.
2. Exchanged Traded Funds (ETFs)
The second way is to buy shares from an ETF that’s backed by gold. As a result, the ETF owns a reserve of gold and you own a percentage of it. This way, you don’t have to physically own any gold and pay storage fees.
Buying into gold-backed ETFs is quite easy nowadays, with brokers like eToro and Plus500. Both platforms allow you instant access to marketplaces from all over the globe. As a result, you don’t have to just stick to Australian ETFs.
Hence, with eToro or Plus500, you can take advantages of geopolitical changes in another country. Generally, the price of gold rises when confidence in the government decreases. Therefore, if a certain country is heading towards a political crisis, you can quickly buy stakes in a gold-backed ETF based in that region.
In order to make smart decisions like this, you need to have the ability to predict accurately. With eToro, you can cheat a little bit. Its CopyTrader system allows you to automatically mimic trading decisions made by experienced investors. So if traders start investing in gold, you’ll be notified and will have the opportunity to follow their actions.
While Plus500 isn’t as intuitive as eToro, it’s very user-friendly. Accounting opening is a seamless experience with the platform, plus there aren’t any trading fees! In addition, you can easily access different markets, updates and statistics on stocks.
With platforms like eToro and Plus500, you can easily enter into CFD trading as well. By trading on a margin, you don’t have to pay the full ask price of ETFs. CFDs are a great way to profit off of upcoming gold price hikes. Again, with eToro’s CopyTrader system, you’ll have enough cues to jump on a few CFDs for gold-backed ETFs.
3. Stakes in Mining Companies
The third way to invest in gold is to buy shares in mining companies through brokering platforms. The share price of these companies correlates to the value of gold, which means it’s somewhat similar to owning a stake in a gold-backed ETF.
However, the amount of risk involved in this method is significantly higher. This is especially true if you choose to invest in mining companies that are still in the exploration stage. The reality is that a large portion of them don’t end up finding gold. As a result, the future of these companies may be threatened.
And that covers all the basics of investing gold in Australia. First of all, you need to understand that gold is a long-term investment instrument. It’s primarily used to give stability to wealth and to hedge against political and economic shifts. There are many benefits to investing in gold, which all stem from how stable it is. Lastly, there are three ways to invest in gold: owning physical assets, buying ETFs and investing in miners.
Why Should You Invest in Gold?
Here are several excellent reasons why you should consider investing in gold:
It’s Historically Great At Holding Its Value
For centuries, gold has been a reliable way for households to pass on wealth to the next generation. Gold isn’t susceptible to corrosion like a lot of metals, meaning that its aesthetics don’t change. That’s one of the biggest reasons why gold has held its worth over the ages. In addition, people are always drawn to gold and it’s consistently been a symbol of wealth and luxury. Here you can see the current gold price.
It’s A Great Hedge Against Inflation
The value of gold in a country is directly proportional to the expense of living. That’s why you always see the price of gold shooting up whenever the economy plummets. This is because when a currency’s purchasing power decreases, everything starts to become more expensive. This includes gold as well.
In addition, more people may be encouraged to purchase gold during times of inflation due to its stability. As a result, demand for gold goes up and with it, the price.
It’s The ‘Crisis Commodity’
The price of gold isn’t just sensitive to the health of the economy, but to geopolitical influences as well. The effect is the same as the former: its price rises when the situation is going downhill. In fact, earlier this year, the value of gold increased in response to the EU crisis.
It’s Great For Diversifying Your Portfolio
The point of diversifying your portfolio is to increase the stability of your investments. For instance, if you’ve got all of your money on stocks, then you’re going to lose big. On the other hand, if you’ve got a similarly-sized investment in gold, you can hedge against it. This is because the value of gold rises as the stock market falls.