Sharing is caring!

Do you want to buy gold? It sounds like a good idea, especially during economic downturns. However, such investments come with unique challenges. They also do not always play out as expected. So, should you still invest in gold during a recession?

The metal has gained a reputation for being friendly during a recession. When there is a huge pullback on the economy, its price often increases. The big picture is that it is safer than equities. However, there are no price valuations for long-term holdings. For instance, looking back at previous years, the stock market had its shine and down moments, but it has over time outperformed gold. 

Investing in bullion involves many unexpected considerations and costs like secure storage and insurance, but it can serve as a hedge during a recession. The metal does not generate cash flow, so you should consider investing in a sizable quantity that you can dispose of with ease. You can visit this website to find out what you should do when stocks are crashing.

How to Invest in Gold

The following are methods to choose from when investing in gold:

Physical Gold

This is also known as bullion as it comes in form of coins, bars, or jewelry. It is an exciting method of holding precious metal because you can touch it. However, it is very challenging to purchase, store, and resell. Although jewelry may accumulate value after a period, appraising it could be complicated. There is also no guarantee that you will sell it far more than the initial cost price.

You can buy bullion from online and local dealers and pawn shops. You also need to know the spot price before buying, so you can negotiate properly. Additionally, you can consider buying in bars instead of coins because you will likely pay higher for coins. Dealers charge for the collector’s value instead of the coin’s gold content. 

Gold Stocks

Is gold a good investment? - Pros and cons of investing in gold

This involves buying stocks from gold-mining companies. It is profitable because you can benefit in different ways. First, if the price of the commodity increases, the company’s profits will also increase. Second, the company can increase production, thereby, boosting the value of your stocks. 

Just like individual stocks, gold stocks are also risky. You only need to choose a reliable company to invest in to ensure that you do not lose all your investment. The company you choose should have solid environmental responsibility culture. You may also want to avoid small companies who are not mining but want you to buy stocks.

Gold Futures

This method allows you to speculate the rise or fall of the commodity’s price, and you can collect physical bullion if you want. The benefit of adding futures to your portfolio is the level of leverage it offers. Simply put, you can buy many futures with just a small amount of money. Now, if your speculations go in your favor, you can cash out quickly.

You must also know that if the speculations go the opposite direction, you will spend more money to sustain the contract. Otherwise, your broker will dissolve the position. You can make money from a futures contract, and you can quickly lose it too.

Bullion ETFs 

If you do not want to face the challenges of owning physical bullion, you can invest in ETFs that track the commodity. ETFs match gold performance against its yearly expense ratio. They also permit investors to exchange bullion for cash and at the current market price. 

It is important to note that investing in bullion ETFs will expose you to any rise or fall in the gold price. The fund performs like the commodity’s current price minus the fund’s initial cost. While ETFs own bullion, they save investors from the risks of owning physical gold. These risks include illiquidity and the difficulty of getting the full value of your holdings.

Tips for Buying Physical Gold

Gold Investment in Nigeria - Everything you should know - InvestSmall

If you have decided to forge ahead with your gold investment plan, here are a few tips to help you:

Get a Reliable Dealer

Just like buying from physical and online stores, when buying bullion, there will be many pushy salespersons and scammers. Some sellers may inflate the value of their product or persuade you to purchase immediately. Doing research in advance will prevent you from meeting the wrong bullion dealer.

You need to investigate the background of the company or individual before buying. Let’s say you want to buy gold from a company named Blanchard, the first thing you should do is to search for a Blanchard Gold review to be sure that the company is real and has a good track record in the market.

Match the Spot Price Against the Dealer’s Fees

Most times, dealers hike their price above the commodity’s spot price. The premium consists of the dealer’s fees and charges for manufacturing and shipping. You need to know the current global price of the commodity so you will know when the dealer is overcharging you.

Get Secure Storage

Dos and Don'ts of Gold Storage | Retirement Living | 2021

Because gold is valuable, someone may want to steal yours. So you should be concerned about getting a secure place to keep your bullion. Banks offer safety deposit boxes that only authorized persons can access. They do so at a fee ranging from tens to hundreds of dollars per year. You can also acquire a safe for your home or office, depending on where you decide to store your assets.

Purchase Insurance

Although this is an extra cost, it offers security for your assets. Some storage facilities offer insurance, and it forms part of the fees you pay. But if you want to store your physical bullion yourself, you need to find out whether the insurance covers the category of assets you own.

Final Thoughts

Investing in bullion is a fantastic idea especially during a recession. We explored the different means of investing in the commodity. But you must know that reselling physical bullion may be quite tough. Pawnshops are not an option because they never offer fair prices. Also, if you want to sell it back to the dealer, you may do so at a price that is below the spot price. Hence, it is advisable to hold bullion using different methods.

Leave a Reply

Your email address will not be published. Required fields are marked *

I accept the Privacy Policy