Historically, investing in gold has always been perceived as a safe strategy. Gold’s proven reliability as a store of value, due to its high demand, made it an asset of choice to protect one’s wealth. However, how we invest in gold can affect the outcome of our investment. Here we explore different ways one can invest in gold, highlighting some of the advantages and some of the disadvantages of each method.
1. Buying Gold Jewelry
Buying Gold jewelry is in effect an investment in tangible, ornamental gold. The gold used in jewelry is typically an alloy with a gold purity of between 58% and 92% (14 - 22 carats). The jeweler that fabricates a piece of jewelry will typically also apply a 100% to 300% premium to the value of the gold used in order to price in their profit. This makes the price of jewelry at which it is sold compared to the value of the precious metal used in its production expensive.
The advantage of owning gold jewelry is that you can wear it and enjoy its beauty everyday, while knowing it will keep some of the value of what you paid for it in case you want to sell it one day. The disadvantage is the inherent risk of loss and theft, which in many cases requires one to to purchase insurance to protect one’s investment.
Selling gold jewelry in a time of need is also challenging. The sale of aesthetic objects can not be partial or fractional but needs to be sold as a complete piece, making it impossible for one to extract a partial amount of liquidity from a piece of jewelry. In addition, the sale process can be slow and tedious. Selling a piece of jewelry means going to different jewelers and pawn shops to get different quotes. This process often leads to limited demand and, therefore, to substantially lower prices than the value of the gold used to make the piece.
2. Gold Coins
Gold coins are physical gold pieces of 90% purity (22 carats). Usually considered a good investment, buying gold coins may include additional costs 20% to 33% above gold spot price, due to the manufacturing and marketing costs of these coins. Â
The advantage of buying gold coins and keeping them safe at home is that you have total control over your investment and its safe keeping. On the other hand, the risk of keeping gold coins at home is the possibility of theft, which would require taking out insurance to protect the investment. When it comes time to sell these gold coins, the process of selling them to pawn shops or specialized gold buying businesses can be overwhelming. These businesses will refuse to purchase them when detecting any alleged imperfections in a piece, settling on a price that is below gold’s spot price.
3. Funds and ETFs
Financial instruments such as funds and ETFs (Exchange Traded Funds) linked to the price of gold are offered to investors as alternatives to owning physical gold. These are designed to allow investors to track the price of gold without having to own the metal. These instruments are structured on top of derivative financial instruments that are not usually backed by real gold. It is important to keep in mind that there are risks associated with the performance of these financial products as they dont always follow the performance of gold.
An advantage of investing in gold-linked funds and ETFs is the ability to invest any amount, making it easier to enter the market with more modest investments. Likewise, there are no minimum amounts for the total or partial sale of these financial products, giving investors flexibility and almost immediate liquidity.
Nevertheless, the acquisition of these instruments is not cost-free, and it is extremely important to pay attention to the opening commissions, which may reach up to 5%, and the management costs of the instrument, which may reach up to 3% per year.
4. Aktagold
Aktagold’s gold offering is based on buying physical gold of exceptional purity of 99.99% (24 carats) that is usually not available in the market to retail buyers in the most transparent way possible. Some of the benefits of buying gold through Aktagold are:
First, buying physical gold through Aktagold is a transparent process: The price used is based on gold’s spot market price at the time of making the investment, plus a small margin (until now these low margins were only available to institutional investors). AktaPlus allows you to invest in gold with an initial purchase from $10,000 and the possibility of making subsequent purchases from just $100, making it accessible to investors of all different profiles.
Second, Aktagold protects your gold: The gold that is bought through Aktagold is stored in high-security vaults located in Canada, one of the safest and most stable countries in the world. The gold held by Aktagold is guaranteed 1:1 by the Royal Canadian Mint, which provides an additional layer of protection to clients.
Third, Aktagold allows you to sell fractional amounts of gold (down to one thousandth of an ounce): The sale order is put through Aktagold’s website and the transaction takes place based on the gold spot price at the time of the sale, minus a minimum margin. The funds generated by the sale are deposited into the investor's bank account within approximately 3 business days, ensuring an efficient and secure experience in managing your gold holdings.
Fourth, Aktagold offers its clients an active and transparent market to buy and sell gold: Aktagold buys and sells gold for its clients based on the spot price adjusted by a minimal margin. Clients always know how much they are buying for and selling for with out any hidden costs, fees or premiums/discounts.
Choosing how to invest in gold depends on your goals and preferences. It is essential to consider factors such as associated costs, the minimum purchase and sale amounts, the risks associated with each alternative, and the liquidity of each option before making a decision. By evaluating this set of criteria you will be able to define the strategy of gold investment that best suits your personal situation.
Protect your Savings
Aktagold's mission is to help people around the world protect their money from the economic and financial instability of their home countries, giving them access to gold savings in Canada's most secure vaults, an option that previously used to be reserved only for those with the highest income.
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