During economic uncertainties, like the state we found ourselves in currently due to the outbreak of the Coronavirus, people are investing their money in gold. Gold is not just beautiful and pleasant to the eye. It is one of the world’s most valuable elements and has strong electrical conductivity. Gold is very durable; it doesn’t alter or corrode over time.
Those are just some of the reasons why gold has so many use cases from all walks of life. Gold is the oldest investment asset in the world. In this article, I will highlight the 5 most popular ways people invest in gold.
1. Gold Bullion
Gold bullion is a physical investment in gold. They can be purchased from reputable gold dealers or banks in coin or bar form. Investors can purchase gold bullion in sizes ranging from just 1 gram to 1 kilogram.
Gold Bars
Gold bars are sold in grams or ounces of gold. The price of a gold bar depends on the weight and purity of used gold. One-gram gold bars are the smallest sized bars you can purchase. The advantage of owning smaller bars is that they are easier to sell compared to larger gold bars that require greater investments.
However, gold bars are sold with a premium added to the spot price of gold. The premium on smaller bars is higher than that of larger bars. Furthermore, some bars could be collectibles, rare, and limited in supply. The added premium on these bars is again bigger because of their scarcity. A general rule is: the bigger the bar, the smaller the premium.
Gold Coins
Gold coins are a great choice for new investors. These coins used to be a means of payment in the past but since the invention of fiat currencies, they are now mostly viewed as a type of investment or collectible item.
Many countries mint their own gold coins. Some of the popular ones include the American Eagle and the Canadian Maple Leaf series.
Coin collectors will pay more money for rare bullion coins than for the underlying value of the metal itself, due to the subjective value those coins hold for them. This value is based on their design, the beauty of the coins, and the rarity of them.
Cons of Owning Gold Bullion
- The possibility of getting scammed by unreputable gold dealers
- The need for expensive physical safekeeping and insuring of the gold in safety deposit boxes
- High premiums on purchased gold bullion
2. Exchange-Traded Gold Funds (ETFs)
Investors who don’t want to deal with the physical forms of gold have the option to invest in exchange-traded funds, known as ETFs. Gold ETFs track and follow the price swings of their underlying asset and they are traded on exchanges. Many consider ETFs to be a more liquid investment class.
Gold ETFs are backed by physical gold stored in vaults, and these companies charge their customers a yearly commission for storing the gold in their name. The vaults are regularly audited by official third-party auditors. An investor in a gold ETF doesn’t own the physical gold stored in the vault. He never gets possession of the gold in any form; he owns stocks and contracts that can be redeemed on an exchange for fiat currencies.
SPDR Gold Shares (GLD), Is one of the oldest and most reputable gold ETFs in the world. GLD shares can be bought and sold on the New York Stock Exchange. Each share is worth one-tenth of an ounce of gold. GLD invests in gold bullions only, while other ETFs can invest in both the bullion and the shares of companies from the gold industry.
Gold ETFs trade through online brokers. A broker is an intermediary who takes a commission for connecting a buyer to a seller of gold. Gold prices often increase when the USD loses value. During such events, gold ETFs are a good way to minimize the risks.
Cons of Owning Gold ETFs
- The prices of gold ETFs fall faster than the spot price of gold during political/economic uncertainties
- High commission paid to online brokers and redemption fees
- Loss of privacy due to a need to complete substantial identity verification procedures to be able to trade on stock markets
3. Digital Gold – the GOLD Token
Digital Gold (https://gold.storage/en/home) is an Ethereum-based cryptocurrency that offers a safe method to store and send payments in GOLD tokens. Based on blockchain technology, it gives users an easy entry point to the gold market.
GOLD tokens are tied to the spot price of gold. Each token is equal to 99.99% fine gold. The tokens are backed by real physical gold that is stored in BullionStar vaults in Singapore. The company currently possesses 17,200 grams of gold, worth almost $1 Million. Live audits are available 24/7 at https://gold.storage/en/audits.
Digital Gold is an ideal opportunity for new investors to invest in gold thanks to transparent, un-hackable, and decentralized technology. The Ethereum blockchain enables near-zero cost transactions, verifiability, and immutability.
The project has its own marketplace that offers the easiest way to buy or sell GOLD tokens. Investors can purchase GOLD tokens, free of charge, via an integrated smart contract, in exchange for Bitcoin or Ethereum. The whole process takes only a few minutes and everything is self-explanatory. For a detailed tutorial on how to trade gold via the Digital Gold marketplace, please check here.
Gold is no longer just a store of value. Thanks to Digital Gold, it has become a legitimate and stable payment method, overcoming all the risks associated with owning physical gold.
Studies have shown that investors prefer not to own gold in its physical form, due to various complications concerning transportation and safe storage of the metal. Digitalized gold in the form of GOLD tokens is the perfect solution that offers the stability of the gold market, backed by the security of blockchain technology.
Pros of Using Digital Gold (GOLD Tokens)
- First-grade smart contract security provided by the Ethereum blockchain
- No costs associated with storage and transportation of gold
- No premiums on Digital Gold tokens
- 100% anonymous method of buying and selling gold with absolutely no KYC requirements
- Gold tokens backed by audited physical gold stored safely in company vaults
- Constant liquidity supplied to the Digital Gold Marketplace by the company
- Gold used as a legitimate payment method
4. Jewelry
Gold jewelry is a sign of wealth and power. The purity of gold is measured in carats. Depending on country laws there are different minimum caratages of gold. 8-9 carat gold is the lowest caratage for an object to be considered gold in some European countries. In the USA, 10-carat gold is the lowest caratage by law. The gold that belongs in this assembly is mixed with other metals such as zinc, silver, copper, and nickel.
18-carat gold, for example, consists of 74-75% gold and 25% other metals, like copper or silver. 24-carat gold is the closest you can get to 100% purity. It is actually 99.5% pure because 100% is not possible, but it is still considered as pure gold.
Forbes.com believes that the price of gold jewelry should be calculated using the formula: "Market Price x Weight + Design Premium”. The premium depends on the build quality and the difficulty of production. There are no exact rules but some producers sell their jewelry with premiums between 5-20%.
Gold jewelry comes in different types of yellow and white colors. Yellow gold is the most commonly used type of gold in jewelry. However, by mixing different metals through a process known as alloying, minters can create white gold. White gold is created by adding silver or palladium to pure gold. Another variant of gold is rose gold which is created by adding copper.
Gold merchants sell jewelry at much higher rates than the quantity and quality of gold used in the production. Why? Because the price has to include the wages of the workers, rent, advertising, taxes, etc. On top of that, the store has to make a profit to stay competitive.
It is believed that the gold market capitalization will reach $300 Billion in 2020. The jewelry industry deserves its say on the market.
Cons of Owning Jewelry
- It is a sign of wealth that catches the attention of the wrong people
- Purity of the gold is unknown, and the buyer is forced to trust the merchant
- Jewelry is sold at much higher prices than the gold used in the production
5. Gold Futures Options
A gold futures contract is an agreement to buy or sell gold at a previously agreed price at a specific time in the future. They give the investor an option, but not an obligation to buy/sell the asset. Futures contracts are speculative in nature. They allow investors to speculate whether the prices go up or down in the future.
This type of financial instrument is designed for seasoned investors who are not looking to invest a lot of money. Gold futures contracts are entered with premiums. If the prediction of the investor is wrong, he/she loses the premium associated with the contract.
Gold futures are traded via a futures broker. Futures options for some ETFs, like the SPDR Gold Shares ETF, can be traded through a standard broker account that has been approved for futures trading.
A popular futures contract is available at the Chicago Mercantile Exchange. Such a contract requires a minimum deposit called an initial margin. Depending on daily price movements on the gold market, investors will either make a profit or lose money. If the value of a contract drops below a determined minimum amount, the investor will have to deposit enough money to equal the initial margin. Once the contract expires, it is settled in fiat.
These gold futures contracts can be profitable if an investor can foresee a price spike in the near future, or a sudden drop in value, due to political or economic circumstances. But they can also be tough to monitor and they require additional investments to comply with initial margin requirements.
Cons of Gold Futures Options
- Loss of premiums due to unsuitable market movements
- Further investments are needed to respect the initial margins
- Sudden changes of rules by regulators that could negatively reflect on gold futures contracts
Final Words
During times of crisis and volatile markets, as we have in recent weeks, gold trading provides new opportunities for profit. The global Coronavirus epidemic could send gold prices through the roof.
We have seen that there are many different ways to get involved with gold trading. The world as we know it has gone digital. It is moving fast, and as such it requires fast and easy access to the gold market. Owning physical gold carries risks, additional costs, and the need for safe storage.
Gold ETFs and Futures have become very popular. Investors can save some money, but there is still the need to comply with regulatory requirements, undergo lengthy verification procedures, and registering with licensed brokers.
Digital Gold’s GOLD Token is backed by physical gold and secured by modern blockchain technology. It offers the easiest way to enter the gold market and is 100% private and anonymous.
In a world overtaken by targeted advertising and malicious corporations, we are in constant need to keep our business ventures confidential.
Digital Gold Website: https://gold.storage/en/home
My Bitcointalk profile link: https://bitcointalk.org/index.php?action=profile;u=2437930
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