Investing in gold for long term profits

Savers opt to invest in gold for usually one or two reasons - it's traditionally viewed as the ultimate safe haven during times of economic volatility and therefore seen as a wealth preserver. In addition it is used as a hedge against the US dollar.

Given that stock markets have endured some of their worst falls on record as the financial crisis hit, that the response to this was to print unprecedented amounts of money and that the dollar has been floundering, it should come as no surprise that gold boomed. In addition, it is liquid, so therefore easy to sell and buy. It always has supply issues - mining output peaked in 2003 and there's never enough to meet demand.

Gold's long-term returns

Although gold like any other commodity, experiences periods of, sometimes very strong volatility over the long term its returns have been spectacular.

Famously, when Gordon Brown was Chancellor of the Exchequer, he sold off more than half of the UK's gold reserves - some 395 tonnes - in a series of auctions between 1999 and 2002, when the price of bullion was in the doldrums. The move cost the public purse billions of pounds as the average price achieved in the auctions was $275 an ounce. 

Gold is now worth more than five times that.It is very important to remember, however, that while gold has a strong track record of holding its value in terms of what you can buy with an ounce, its price is also entirely dependent on investor sentiment.
When you buy a share you take ownership of a small part of a company that aims to grow, generate profits and return cash to investors either through share price growth, dividends or both.When you buy gold, you are buying some precious metal that people hold as valuable.

 

 

The Only Gold Coins Investors Should Buy

With gold having doubled in price over the last four years - not to mention a U.S. dollar that continues to weaken - it's no surprise at all that the world coin markets are attracting buyers like moths to a flame. First timers often arrive and are confused by all that's available - including rare and antique coins, and a numbing array of "collector" and "commemorative" coins.

But here's a rule of thumb that will make things simple: If you're an investor looking to bolster your portfolio with a modest helping of "hard assets," there's really only one category of gold coins to consider.if you still want to buy gold coins, you need to understand two things:

• Are you an "investor" or a "collector?

Before You Buy

The most important step that you need to take is to determine just why, exactly, you wish to buy the gold coins in the first place.

Are you looking to buy them strictly as an investment - a hard-asset addition to a portfolio that's otherwise composed of stocks, bonds, funds and other such "intangible" assets? Or are you more likely to become a collector?

There's no wrong decision, but you do need to know - because that decision should determine just what kind of coins you are willing to buy.

If you think the coin designs are beautiful, enjoy knowing about their designers and the history of the images depicted, and love how it feels to hold and look at them, then you're probably more of a collector than an investor. That means you'll want to bone up on minting standards, grading, rarity, the completion of coin "sets," and display methods before you begin purchasing.

But if you're trying to establish a hard-asset reserve against the next financial Armageddon - or want to be able to sell at a profit next month or next year - then you are playing in our ballpark and are definitely an investor.

And means you should target the basic bullion coins.