Precious Metals: Investing Insights for Long Term Returns

Gold has seen periods of spectacular performance as a short-term investment. The near term has never been gold’s strong suit, though. While quick periods of meteoric rise in …

Gold has seen periods of spectacular performance as a short-term investment. The near term has never been gold’s strong suit, though. While quick periods of meteoric rise in value have recently burnished the reputation that the precious metal had for quick speculative investment, it is a reputation as the benchmark for long-term safety that has always carried the metal.

As an example, in September 2011, gold investors were on a giddy high as prices hit an all-time record of nearly $2,000 an ounce, prices have since steadily dropped. At the end of 2015, prices were at half those levels.

Gold, though, has risen steadily. Compared to the 23% that the FTSE rose by over the past decade, gold has achieved 150%.

The short term can make some sense, as well

It’s important to remember that when the price of gold falls, it isn’t a trend that affects only the metal. With the US Federal Reserve and the Bank of England both keeping interest rates at historically low levels, the stock markets are currently slow. Seen in such context, gold does do well. Its historical place stands as a store of value for both nations and individuals.

Why do people invest in gold?

When inflation rises, bond levels tend to fall. When the economy stalls, equities taper off, as well. Gold, on the other hand, obtains its value from neither one of these conventional driving forces. It is simply globally agreed upon as a store of intrinsic value. With its ability to hold value, gold can be a great investment in uncertain times, doesn’t tend to offer gains or in income.

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Gold, though, can be a poor investment in a very strong economy. Not because it can lose value, but because stocks and equities can perform better, and raise the value of money far more robustly.

There’s more than one way to invest in gold

As with any solid investment destination, gold can perform well as one part of a well-diversified investment portfolio.

The most obvious way to invest in gold is to actually buy the metal in the form of bullion or coins. According to PM Coins & Bullion, a visit to the website of the World Gold Council can yield multiple reliable trading platforms online, as well as traditional stores. Once you buy, the Royal Mint and many other services offer inexpensive storage and safekeeping. It’s important to buy secure professional storage.

Exchange traded funds

PHGP, PHAU and GBSS are well-respected ETFs that deal in gold. With these investment services, an investor interested in parking money long-term in gold does not need to actually buy the metal. Instead, it’s possible to invest in a mutual fund-like vehicle that puts money in gold. Most of these funds closely mirror the way gold prices move. In some cases, though, ETFs offer improved, leveraged returns. Some ETFs offer the effect of gold investments without actually going anywhere near the metal. Rather than actually buy it, they place the funds that investors bring in into investments that they believe will closely track gold value levels.

ETF’s have their place in any diversified long-term investment portfolio.

Investment trusts and funds

It can seem to make a lot of sense to invest in the stocks of gold mining corporations. It stands to reason that their fortunes should mimic the prices of gold — when gold prices rise, their profits should receive a boost, as well. In practice, though, the markets for gold mining companies tend to not be anywhere near predictable.

Nevertheless, gold stocks can sometimes offer better returns than investments in the metal that those companies mine. Those who make studying the gold industry their business tend to invest in individual stocks on their own, based on the results of their analysis. For regular investors, though, it can be extremely risky to buy individual gold stocks. Instead, it tends to make sense to put one’s money into mutual funds that invest exclusively in gold mining. From Blackrock Commodities to J.P. Morgan Natural Resources, many mutual funds work well.

It’s important to avoid the scams

While picking gold coins can seem like a sure way to put money in pure gold, a few complications do exist. Gold coins do not all command the same value. The better the condition of a coin, the more value it has. A top-of-the-line never-been-handled coin is categorized MS-70. A slightly worn coin is graded MS-50. It’s possible for unsuspecting buyers to pay well over the market price. Many sleazy sellers set the gold coins that they sell in fancy frames to try and keep buyers from examining the merchandise closely.

It’s important to buy from a reputable dealer, and store with a reputable facility. Taking every step with care and knowledge can make investing in gold a viable opportunity.


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