TOP 7 ways to invest in gold + guide for investors

There are at least a dozen ways to invest in gold. Which one should you choose? It would seem that what a difference it makes. Gold is gold. And it doesn’t matter how and in what form we buy it. But there are many nuances: taxes, trading and commission expenses, liquidity, risks and reliability of investments. All this together results in the “profitability” of this or that type of investment.

We will consider only the most popular and affordable options for “gold” investments in Russia for individuals. Suitable for most. Let's look at the pros and cons of each purchasing method.

Investing in Gold: Benefits

Investments in gold are investments in a precious metal in one form or another. The calculation can be both on the increase in the value of the metal itself, and on earnings on shares of mining and processing companies. That is, the basis of earnings is the change in value.

Several thousand tons of gold are mined every year around the world, part of this volume is sent to the jewelry industry, the rest is sold in the form of ingots, that is, the metal is stored as if in the form of raw materials. Today, the sale of such products has been significantly simplified; anyone (at least in Russia) can come to the bank and purchase a gold bar of such weight that they can afford it. There is also a black market, but no one can guarantee authenticity; the metal may be “diluted”.

Why gold?

There are many parameters, based on the totality of which, investing in gold has become the most interesting for investors. Let's look at the main ones:

1. Rarity . Everything is simple here - rare metal is initially interesting precisely because of its low availability. And really, what is 3,000 tons of gold compared to the annual production of copper and other metals? Even silver is mined tens of times more. You can also note platinum, which is mined much less, but in the recent past it was more expensive than gold.
2. Historical aspect . Gold has been a universal means of payment throughout history. Now we can easily exchange rubles for dollars, and dollars for euros (essentially just paper). Before the abolition of the gold standard, everything was much simpler; the peg to gold existed for a very long time. And even the reserves of the central bank are called “gold and foreign exchange”.
3. Demand . Gold is always relevant. Hundreds of tons of jewelry are produced annually; gold is used in instrument making. That is, metal is always and everywhere needed. The fact that production is growing every year directly indicates growing demand.

If all of the above does not convince you of the validity of investing in gold, then let’s move on to the fundamentals.

So, gold belongs to the category of protective assets. In practice this means the following. Let's imagine a situation where economic indicators in major economies are deteriorating and a crisis is approaching (we can recall the mortgage crisis in the United States of 2007-2008). A crisis, by definition, leads to a fall in all risky assets - stocks go down in price, and there is confusion with currencies. At this moment, investors, wanting to preserve their capital, transfer them to the most protected assets that are less susceptible to falling. These include the Japanese yen and the Swiss franc. That is, the fall occurs according to the following scheme:

1. The euro, pound, Australian dollar and others are falling against the dollar. The dollar is the world's reserve currency and enjoys (undeserved!) trust.
2. The dollar falls against the franc and the yen. No matter what anyone says, in terms of stability the American economy is very far from the Swiss one. And large investors understand this very well. This also includes the Japanese yen, but things are a little worse there - the country has a huge public debt. However, the yen has historically been a safe haven asset.

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The most cautious investors invest in gold during such periods . Moreover, the larger the crisis, the greater the interest in gold. 30 years ago, no one could have imagined that this precious metal would soar to the heights that we are seeing now. The crisis has long passed, but prices are still very high; there is no reason to believe that this is a temporary phenomenon.

Every time after the markets fall, the most advanced investors begin to buy shares and cheaper currencies, since the economy is cyclical - growth is replaced by decline, then everything repeats again. Accordingly, protective assets should become cheaper, and risky ones should grow. But this did not happen with gold; it confidently remains at around 1300-1500 dollars per troy ounce.

The second reason

Protection from wars and revolutions

If you are so pessimistic and afraid that war cannot be avoided, again buy gold. But this time - in the form of bars or coins.

But here another problem arises - where to store them? If it is in a safe deposit box, then you are unlikely to be able to pick it up if there is military action on the street. Therefore, there is only one option left - to bury it on your site.

As I have already said at seminars, you will not be able to legally become the owner of gold by visiting a factory or company engaged in its mining. You will need intermediaries - exchanges or banks. As a private investor, you have access to gold bars, coins (investment, collectible), and jewelry. I’ll tell you briefly about the advantages and features of the listed types of assets.

Jewelry

The most accessible asset is jewelry, which can be bought at a pawnshop, jewelry store, even online. Surely women will appreciate such an investment item - both beautiful and practical. But is it worth investing in jewelry? As an experienced investor, I will outline only some of the pitfalls:

• When purchasing, VAT will be included in the price of the product. And when you sell, no one will return the VAT;
• You are not buying pure gold, but an alloy. Typically, jewelry is made from 585 gold. For you, this means that the product contains about half of valuable metal;
• in its pure form, precious metal is cheaper than jewelry, so you sometimes pay more for a “beautiful picture” than it deserves;
• There is a risk of purchasing a fake. Yes, this happens even in jewelry stores. The purity may not correspond to the alloy, or even instead of gold they sell a cheap gold-plated alloy.

The main disadvantage of jewelry is its low liquidity. To whom and where to sell them? You will have to take it to a pawnshop for half the price or at the cost of scrap. Therefore, I do not recommend this method of investment. The exception is professional collectors who understand rare and valuable jewelry.

Ingots

Unlike jewelry, metal bullion has a purity of 999. The weight of the ingot varies from 1 g to several kilograms. Bullions from precious metals can be bought in banks. But before you rush out to buy, keep the following in mind:

• the cost of the bullion includes VAT if the purchased bullion is not stored in the bank’s vault;
• storage costs and risk are high - the bullion can be stolen;
• binding to a specific bank: it is easier to sell the bullion to the exact bank where it was purchased, since banks are reluctant to purchase “other people’s” bullion. And if they buy it, then there may be costs for authentication examination, or the bank will purchase “someone else’s” gold cheaper than “its own”;
• Banks are reluctant to even buy back their bullion. By and large they are sales oriented.

So, what we have: a loss in the form of VAT (20% of the price), and also the spread, which I already mentioned above. By analogy with currency exchange, there are always 2 rates - for buying and for selling. I may surprise many: the spread on gold bars can reach 25–40%. The smaller the size of the ingot, the less profitable it is to purchase. Therefore, if it is worth investing in bullion, then only if you have significant amounts and for a very long time.

Golden coins

This is another way to invest in gold. If you have heard how “friends of friends” successfully bought several collectible coins for 5 thousand rubles ten years ago, and now their price is 5-10 times more - do not delude yourself. It is not that simple.

Will explain. Can you predict with a high degree of probability which bottle of wine (painting, brand) to buy today, so that in a couple of decades its value will increase? If you are not an expert in this field, definitely not. Same with collectible coins. Some increase in price over time, others do not. And this is subject to the same circulation, mass, mintage, year and country of issue. To understand this issue and understand the reason, you need to dig through a lot of professional literature. And even after this, with highly specialized knowledge, there is no guarantee that you will buy “the same coins.”

Let's say you buy a coin. Where are you planning to sell? Banks don't often buy back their coins. See for yourself: the price list for coins is presented on the Sberbank website. Of the more than 3 thousand put up for sale, the bank buys only 200, and even then almost half the price of the sale. There are still collectors, but they will only buy coins if the price is low.

Investing in coins is only suitable for experts and those who purchase gold for a small amount as a souvenir or as an inheritance for descendants.

Perhaps it’s worth asking the question: why do you need these coins at all? If the goal is to get some income in the long term, weigh how much time you will have to spend studying the issue, how much to invest, and most importantly, how much you can get in ten years. Is it worth it?

Factors influencing the price of gold

Now let's look at all those aspects that can play into the hands of a potential investor who has decided to invest in gold . The right timing often eliminates the need for a long wait for the price to rise. Although, you need to understand that this is not Bitcoin, there will not be instant movements of tens of percent.

That is, investments in gold fully reflect the nature of such activities among large investors. We’ve invested, we’ll continue to wait patiently. The main idea is that gold cannot depreciate in principle, and there are no prerequisites for a large-scale fall.

Let's move on to the factors that affect the price of gold:

1. Public instability . There could be anything here - from an exchange of artillery strikes between the two Koreas to a technical default in the United States, that is, everything that is presented with loud headlines in the media. It was this possibility of default that led gold to rise above $1,900 per troy ounce during a period when Democrats and Republicans could not agree on raising the debt ceiling in the United States. At that time, only the dumbest people spoke about this in the economic environment.
2. Non-public instability. Here we are talking about things that are in the news, but that the general public doesn't pay much attention to. For example, the conflict of interests of the same United States with Russia and China has led to the fact that the share of dollars in our reserves has decreased to very insignificant values, while gold reserves (namely physical gold, that is, in bullion) are growing at an accelerated pace. It's a similar story in China. You should not ignore such facts; at first they seem completely unworthy of attention, but in the end they may turn out to be decisive.

   

3. Investor sentiment towards the dollar . Yes, gold is usually valued in dollars, so all trade is designed for this expression of value. But, unlike the metal itself, the dollar is essentially just a piece of paper. Therefore, in those periods when it rises in price, the value of gold in dollars decreases - everything is simple here, it’s an ordinary fraction. At the same time, the weakening of the dollar for any reason leads to an increase in the price of the metal. Many draw parallels with the way currencies move against the dollar and the way gold moves. They do not always correlate, so you should not focus on this alone. Investing in gold is a completely separate topic.
4. State of the World Economy . There is no need to carefully monitor all indicators (inflation, unemployment, production, GDP, etc.). If everything really starts to slow down, as, for example, it is happening now in Germany, then such events may become a good prerequisite for gold to soon become an attractive asset, and, as a result, active purchases will begin on the part of large-scale investors. This is all usually covered in the media, on television. At the same time, you just need to distinguish ordinary chatter from really important information. A single decrease in any indicator means nothing, but a comprehensive decrease should make you think.

At first glance, it may seem that everything described is quite complicated. But that's not true. It is enough to look at the main markets – foreign exchange, stock – once a week. Again, all this applies to those who want to buy at the most convenient time, just before growth. For other investors, buying gold will be profitable in one way or another, it all depends on the goals. We will talk about them further.

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Intrinsic value

Why do gold supporters love it so much? Everything is extremely simple. They say it has intrinsic value (The Street has an explanation of this concept from Kevin McElroy).

Gold bugs claim that when a new economic disaster strikes (we enter a post-oil economy, dinosaurs escape from the fictional island of Isla Nublar, or a new virus wipes out half of humanity), paper money will not be as in demand and trade will be based on gold. That is, due to its intrinsic value, it will become the main currency. I do not think so…

Let's imagine that I am a store owner in difficult times. I also have weapons in my hands to protect myself and my supplies. So, if I'm in a post-Crisis world where runaway dinosaurs rule all of nature, I doubt I'll need gold to survive. This metal will be as useless as paper money. And all because people themselves attached an arbitrary value to it, and the value of gold during a crisis will disappear along with the value of paper funds.

Let's return to our example. Agree that I would want to get something really necessary in exchange for goods from my store: a box of eggs, cartridges or building materials to strengthen the shelter. So will I really need gold? What will I do with it? Cook porridge from it?).

We will never know in advance about the outcome of any given situation associated with a return to the gold standard. At the same time, finding ourselves in a world with dinosaurs, our priorities will be completely different things. And any currency would seem like an ordinary piece of recycled wood.

Purposes of buying gold

Many people are interested in the question: is it profitable to invest money in gold? You can almost always say that yes, it is profitable. But everyone is different and has different ideas about profitability. For example, a seasoned speculator will say that 3% per month is pennies, but for lovers of foreign currency deposits such a return will seem exorbitant. Therefore, it is important to determine what goals we are pursuing. To do this, consider the main options that cover 99% of the entire investor audience:

1. Long-term investing . This may seem strange, but this includes billionaires and some of us. The first want to keep capital in a serious asset that will always be in demand as a physical means of payment. The latter simply want not to lose. In principle, this is understandable - according to the logic of many people, the dollar is there today and gone tomorrow, while gold is always the same. True, we are talking about storing your funds in physical gold or in metal accounts. We'll talk about the differences and nuances further.
2. Speculation . The situation described above with a possible US default in 2011 led to gold becoming an object of speculation. Volatility and swings have decreased significantly since then, but the metal is still subject to quite a lot of activity. The same principle works here as with stocks after a fall - the asset remains attractive, but costs much less, driven down by speculators. Such periods are excellent for buying and holding, because a return to growth is inevitable for one simple reason - giants such as central banks are only too happy to buy cheap gold at a profit. By the way, this is quite easy to notice from the activity during the Asian trading session, when gold begins to grow rapidly.
3. Investments in enterprises . This cannot be said to be a direct investment in gold, but the metal itself certainly plays its role. Just like in the spot market, there are fluctuations here, since everything is tied to real production. On the other hand, the demand for gold is only growing, so there simply cannot be a shortage of consumers for such industries, including the jewelry industry, global investment, and the creation of reserves.

It is impossible to say for sure which of the listed approaches can be considered the most reasonable, since everyone works differently. In general, speculators and long-term investors are two opposites. But speculation requires certain knowledge, attention, and study of information. Probably, not everyone is ready to do this, while buying gold bars is not very burdensome - just like going to the store. Next, let's move on to methods of investing in gold.

Gold standard

Many residents do not like the current monetary system, since it is based on fiat currency. Fiat money is money that is not backed by anything. Essentially, it's just a piece of paper. In simple terms, a dollar has a value set by the government, not by anything specific. In addition, the state has every right to add and remove money from the money supply, which also affects the price.

All world currencies were backed by gold. Under the gold standard, you had the opportunity to ask a bank to convert paper money into gold at the legal rate. And in order for the authorities to print more money, this metal was necessary for support.

There is a fact in my mind that speaks to the cause of the Great Depression. The gold standard obviously plays a major role in this idea. And for good reason. Indeed, in those days, currencies were more susceptible to speculation and devaluation. This was the reason for US banks to abandon such principles. No country currently uses the gold standard. However, until recently, most experts in economic and political activities considered it a well-deserved relic.

TOP 7 ways to invest in gold

Modern technologies give us enormous opportunities. We can perform almost any financial transaction without even leaving home. And investing in gold is no exception. You can work with this precious metal in the following form:

1. Investing in physical gold . The simplest way to buy gold is to go to the bank and buy gold bars. To get started, you can go to the bank’s website or call to get information about the availability of the required bullion (and before that, determine the weight for yourself) and its cost.

Advice!

You need to understand that the bank also wants to make money, so often the cost of gold can differ greatly from the market one . Of course, no one will sell the bullion at the price that is currently on the spot market, but there should not be strong discrepancies. You can call several banks and choose the most favorable rate. If there is no big difference between the cost of, for example, a 100 gram bar and two 50 gram bars, then preference should be given to smaller gold bars.

2. Metal bills . They can be compared to a virtual plastic bank card or EPS. Money transferred to such an account is converted into “virtual” metal. As the price of metal increases, the amount of money increases. And vice versa, if the metal becomes cheaper, then the amount becomes smaller. The advantage is obvious - there is no need to deal with storage. Everything can be done directly on the Internet if you already have an account with the bank.

The main advantage is the absence of VAT, since we do not have physical metal, so there is nothing to tax. Another plus is the ability to quickly carry out buying and selling operations; this is suitable for those who are engaged in active investments and prefer short periods of holding such “positions”.

3. Shares of companies related to gold mining . This was discussed in detail above. We just buy shares and hold them. As always, there are two ways to earn income from such investments:

• receiving profit in the form of dividends. This becomes very relevant against the backdrop of talk about a legislative increase in dividend payments;
• making a profit due to the fact that shares increase in price. It is curious that if the dividend level is actually raised, it will lead to an increase in all popular stocks, that is, you will be able to earn money in both directions at once. True, there will be profit only when the security is sold after growth.

Over the past year, company shares have been growing strongly, for example, here is the Polymetal chart:

4. ETF . An even more balanced investment idea. It may happen that a particular company starts having problems. And the investor will not be lucky enough to invest in it. By purchasing ETFs, we immediately cover an entire industry, which is basically stable and in high demand. That is, it is difficult to predict any cataclysms, but such phenomena in the global economy, on the contrary, will lead to great demand for the metal and, as a result, a significant improvement in the affairs of gold mining companies.

It is advisable to choose large companies on the list of investments. For example, the Russian gold mining company Polyus a year ago was worth almost half what it is now in 2020. That is, almost 100% per annum for the second type of earnings on shares.

5. Mutual funds . It’s about the same story as with ETFs, only more familiar and has been present on our market for a long time. There is almost nothing to add to what was described earlier, except for the fact that large banks are often associated with such mutual funds, for example, the Sberbank gold fund , which invests in the foreign investment fund SPDR Gold Trust . The dynamics are not bad, and the more tense the situation in the world, the better the fund is doing. The latest surge in activity is trade disputes between the same United States and China.

6. Trading through a broker . It may seem like it's for the “young and active,” but the whole process is very simple. There is no need to trade through the Moscow exchange; any large and reliable Forex broker will do. We open an account, add capital and then trade the XAU/USD instrument. There are no disadvantages to this method of investing money in gold, but there are significant advantages.

For example, we will always deal with the market price, and the difference between buying and selling will be about 30 cents. The second point is the presence of leverage (it is, however, the main temptation to enter the market with a large volume). With leverage we can operate with much larger amounts than we have. A well-caught bottom will allow you to increase purchases when the price moves up, having protection in the form of a break-even stop order for all positions in total.

7. Speculation on binary options . Options on gold are very popular; almost every binary options broker has them. The basic idea is the same as in the case of other financial instruments - to calculate the time correctly. But you need to understand that this has nothing to do with investing; binary options are far from it. In addition, it should be taken into account that gold is extremely volatile on small time frames, so it will be difficult to make money with turbo options. But you can start speculating right now by registering with a broker and replenishing your account through any electronic payment system.

At the same time, before moving on to real binary options trading, it is recommended to study the rules of money management, as well as the basics of trading BO.

Interesting Facts

Gold is a precious metal that has been known since ancient times and was considered an indicator of wealth. Today the situation has not changed; metal still symbolizes prosperity.

The price of the precious metal has changed frequently over the past twenty years. People who invested in it in the 2000s had no idea how high the price would reach. Since the 2000s, this metal has rapidly increased in price, and by 2011 the mark increased from $300 to $2,000. Starting from 2020, it varied from 1200 to 1400 conventional units.

The method is suitable for those who want to preserve their capital

Assessment of the current state of the gold price

Making a forecast for the price of gold is a completely thankless task. Today we’ll say one thing, and tomorrow Trump will sneeze on Twitter and it will grow by 4%. And the day after tomorrow it will fall by 6%. In general, this is pointless. In general terms we can say the following:

1. The situation in the Middle East is far from calm, incidents with Iran occur regularly, Saudi Arabia is attacked by drones, and from time to time someone detains someone’s oil tankers. All this, of course, suggests a possible flare-up of the conflict and possible military action.
2. US-China negotiations are not making much progress in 2020. The balance of payments is changing, and it is completely unclear what will happen next. There is no talk of military action, but the “trade war” and reproaches from the Americans are spurring investor interest in defensive assets.
3. The course towards de-dollarization has not been a local trend in Russia for quite some time. More and more countries are refusing to use the dollar in payments, so its role is decreasing. We have agreements with India, China, Iran. The list of countries will only continue to grow.

From all that has been said, we can draw a simple conclusion, which suggests itself - gold in the range from $1400 to $1450 can be called attractive for purchases. And you can do them by dividing the total amount into components. For example, buy a little at 1450 and wait, maybe they will let you buy at 1440, and so on.

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Investing in Jewelry

Here are the most controversial issues. If coins and bars hidden in a safe are just waiting for their finest hour in the form of an increased price, then jewelry can make you happy every day when you wear it.

Jewelry products cannot be called an investment instrument due to negative returns. Their price includes the store's markup and the cost of the jeweler's work. At the same time, jewelry is not made from pure gold, but uses alloys, stone inserts, etc. If you want to sell jewelry at a pawnshop, they will accept it as scrap at a price three times lower than in the retail chain.

But the sale of scrap can also bring profit in years to come, when the price of gold has risen sufficiently. One gram of gold scrap, which cost 1,400 rubles in 2020, was valued in the form of jewelry in 2010 at only 1,000 rubles per gram. And this is already 5% of annual income.

If you buy exclusive handmade gold jewelry, then their artistic value may in the future attract connoisseurs, who, however, will need to be looked for.

Ingots

Bank bars are marked bars with documents containing 999.95 fine gold. Typically sold in hermetically sealed packaging, jars require identification upon purchase.

When purchasing a bank bullion, be sure to check that you have all the documents for the gold, plus keep the receipt.

Disadvantages of Investing in Bullion

• — the need to pay VAT (18% on the cost of gold, which will not be returned in the future);
• - difficulties with selling. Banks are reluctant to buy bullion, and very carefully check not only the documents of the gold itself, but also its physical safety. The presence of scratches or abrasions gives an almost 100% guarantee that the bank will not buy the bullion.
• - high discount on sale. Banks buy with a spread of at least 20% to the market price.

Pros of investing in gold bars

• — high liquidity;
• — 100% protection from inflation, crises and devaluation, not only of the ruble but also of the dollar.
• — in the next 5-6 years, the profit will be at least 30%, with a profitability of 70%

Where is the best place to buy bullion?

The optimal option is to purchase outside Russia; in most countries such a purchase is not taxed, which will save 18%, plus in Russian banks the difference between the market price and the sale price of bank gold differs by 20-25% (this is especially noticeable on small bars). The spread is much lower abroad. True, you can only buy within a certain limit (check with customs before purchasing), everything above is subject to an additional customs duty.