A Comprehensive Guide to Investing in Gold
If you’ve inherited any gold heirlooms from your grandparents or even great-grandparents, then you know how durable the precious metal can be. Everyone knows the expression, “Diamonds are forever,” yet not everyone knows that pure gold can last forever too.
That means that, when you invest in gold, you invest in your future.
Gold can be an excellent investment: compared to other assets, gold is stable, and tends to increase in value over time, including during financial crises.
In fact, gold is considered a safe haven asset: an asset that holds or increases in value during tumultuous economic times. During the early days of the COVID-19 pandemic, for instance, the value of gold per ounce increased by 30% from the start of the year, surpassing $2,000 USD for the first time and reaching an all-time high.
So, should you invest in gold? It’s a big decision, and it’s not to be taken lightly. Here’s a look at a few things you must know before you choose.
Why Invest in Gold?
Investing in gold—whether the metal itself or gold-related securities—isn’t entirely without risk, of course. Like any other asset, gold rises and falls in value. Historically, however, gold has served as a hedge against both rising inflation and declining U.S. dollar. Gold tends to retain its value during times of inflation far better than currency-based assets that may rise in price yet fall in value. That’s one major reason why gold is considered one of the safest investment options.
Another reason to consider investing in gold is that it may diversify your portfolio. Gold maintains its purchasing power for years and years, and it may act as an insurance against financial black swans, volatile rates of inflation, and tail risks.
Gold Bullion
Investing in gold doesn’t only mean investing in the precious metal itself. There are many investment options, including exchange traded funds (ETFs) or futures. For beginning investors, though, investing in gold bullion is the most straightforward option.
Gold bullion refers to physical pieces of gold of high purity that beginning investors can easily buy from gold sellers. Gold bullion comes in the forms of bars, coins, and ingots. These can be held as reserves at central banks or at institutional investors, and used as legal tender.
In Canada, sales taxes don’t apply to gold bullion, and you can also include gold in your RRSP—meaning that by investing in physical bullion, you gain the tax advantages that come with contributing to your retirement savings.
What About the Price?
Investing in gold and silver bullion isn’t exactly cheap, but neither is it as exorbitantly expensive as most people think. One of the most affordable options is to buy only a few grams of gold bars. All you need is some savings at your disposal.
Buying gold bars will allow you to trade for larger pieces of bullion. So, if you want to invest in the future, you can start small and build from there.
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