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How to Invest in Gold? Advantages and Disadvantages of Investing in Gold

Gold is often associated with wealth and accumulation, and historically, gold investments have been popular. It rarely decreases significantly in value and invariably appreciates over time. Particularly important is that precious metals usually retain their value during financial crises, allowing investors to emerge with minimal losses. We’ll explore the benefits and current relevance of such investments and provide guidelines on how to invest in gold properly.

How to Invest in Gold – Features

Investing in gold might seem straightforward, but it has little in common with purchasing jewelry. There are three main methods of investing in gold:

  • Buy a gold bar or investment coin.
  • Open a “metal” deposit at a bank, where the account holds not just money but the value of a specific mass of gold. Clients earn interest, and the deposit value changes with the gold price.
  • Purchase shares in an ETF fund, which is more akin to investing in securities.

Advantages of Investing in Gold

Gold is traditionally considered a good investment for several reasons:

  • Absolute protection against devaluation. While price fluctuations are possible, radical depreciation is unlikely due to its limited availability and constant demand, including from the industrial sector.
  • High liquidity. Gold can be sold at any moment.
  • Bars or coins can be a payment method without needing to be converted into cash.
  • Physical bars cannot be stolen by fraudsters or hackers like money from a bank account.
  • Precious metals are easy to store and transport at home and can be transferred to others without any commissions or restrictions.
Bank bars – the best gold investments

Disadvantages of Investing in Gold

Despite the apparent advantages, investing in gold has its drawbacks:

  • Limited opportunities for quick earnings. Prices of bank metals fluctuate slowly, so benefits are only noticeable in the long term.
  • Challenges in converting to cash. Banks usually buy back their bars at a lower price than they sell them. One must wait for a significant price increase to convert a bar into cash without a loss.

A bar is a good option if your goal is long-term money preservation rather than quick earnings. For other purposes, it might be better to look into other assets.

How to Invest in Gold - pros and cons

How to Implement Gold Investments

If you’ve decided to invest in gold, here’s a step-by-step guide for beginner investors:

  1. Choose between physical metal or a “metal” deposit. In the first case, you can wait for a price increase and sell. In the second, you receive interest on the deposit while the sum increases parallel to the gold price. However, deposits in precious metals are not covered by the Deposit Insurance Fund in case of bank issues.
  2. Decide on the amount to invest in gold. Be aware that you can’t buy less than 1 gram.
  3. Find a trustworthy and reliable bank.
  4. Purchase the desired amount of bars. Banks usually offer small bars ranging from 1 to 5 grams, but larger sizes up to a kilogram are also available.
  5. Organize safe storage. Small amounts are typically stored at home, but you can also rent a safe deposit box at a bank.
How to Invest in Gold: Coins for gold investment

How Not to Invest in Gold

The worst gold investment idea is to buy jewelry. While beautiful and functional, it is unlikely to yield a return. The main reasons include:

  1. The cost of the piece is much higher than the materials used, as it also includes the jeweler’s labor, taxes, and retail markup.
  2. The amount of pure metal in jewelry is less than in a bar, as alloys are often used.
  3. Selling jewelry at the purchase price is nearly impossible. It must usually be sold as scrap, which is significantly cheaper.

Therefore, it’s advisable to consider only bank bars or investment coins, or possibly a metal deposit, as an investment option.

Investing in Gold as a Protection Against Inflation – Video

Gold investments help preserve wealth during turbulent times, including protecting against inflation. Learn more in this video:

Gold investments – protection against inflation – watch the YouTube video.

Conclusions

Investing in gold is a good idea when you need to preserve financial assets for a long time. It does not depreciate and remains relevant for centuries. In the long term, investing in precious metals can also yield profits, but it is not suitable for quickly earning money.

You can also read our article – How to Invest in Stocks: A Comprehensive Guide.

Frequently Asked Questions about Investing in Gold

Which is more profitable to invest in – bars or coins?

Typically, banks are more eager to buy back bars, making them a more advantageous investment.

What size bar is more profitable to buy?

The larger the bar, the cheaper the price per gram of metal, so buying large bars is cost-effective. However, they are harder to sell.

Can gold bars be transported across borders?

Yes, bank metals up to 0.5 kg can be transported without any issues. For larger amounts, a license and declaration are required.

What other precious metals can be invested in?

Banks also offer bars of silver, and less frequently, platinum and palladium.

What is the best term for investing in gold?

Investing in gold make sense only in the long-term perspective. Plan for at least 3-5-10 years.

Eddy Coherent – Finance Expert with Extensive Industry Experience
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Eddy Coherent is a finance expert with extensive experience in the industry, known for his deep understanding of financial markets and strategies. He shares his expertise on the WeaveMoney portal, where he translates complex financial concepts into actionable insights. Eddy's contributions are valued for their clarity and precision, helping readers make informed financial decisions.

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