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Is It Right Time To Invest In Gold?
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Is it Right Time to Invest In Gold?

Investing in gold is one of the proven methods to preserve value. When a national currency losing its value, it is wise to seek for alternative investment. To allocate a portion to gold assets is similar to a financial insurance policy.

The followings are suggestion that how you can seize the opportunity to trade in Gold.

1. Gold Bar Or Gold Coin

You can buy and sell physical gold such as coins , bars or jewelry directly from local jewelers. The popular gold bar like Credit Suisse Gold Bullion Bar is an internationally recognised symbol of quality

and backed by the Credit Suisse Bank of Switzerland. American Eagle Gold bullion coin is the world's most widely traded gold bullion coin. It's weight is guaranteed by the USA governamnt.

The drawback of buying physical gold is to locate where to keep it and how safe it is. Kitcom is a online one stop jeweler that offers gold trading and safety box service.

Try to buy on spot price if possible. When you buy from local jewelers try to minimize the spread. The spread is the price difference of spot price and buying price. It is not wise to pay more than 10% of the spot price , in order to maximize our profits we should keep the spread or premium as low as possible.

PREMIUM = ([Quoted Price – Spot Price] / Spot Price) *100

2. Gold Exchange Traded Fund (ETF)

One of the ways to trade on Gold is through Gold ETF . ETF is easily accessible , transparent and no worry about keeping physical gold in a safety box. In the market , there are three ETFs that backed by physically gold and it track gold's spot price.

SPDR Gold Shares (GLD) GLD was incepted on 2004, is a major Gold ETF investment trust that tracks the price performance of the gold bullion, it is the largest physically backed Gold ETF and traded in NYSE, Tokyo Exchange, Stock Exchange of Hong Kong and Singapore Exchange.

iShares Comex Gold Trust (IAU) was listed in NYSE on 2005 and Toronto Exchang on 2010. The operational of IAU is similar with GLD.

ETFS Physical Swiss Gold Shares (SGOL) which launched in September 2009 , backed by physical gold bullion located in Zurich, Switzerland, SGOL is designed to offer investors a simple, cost-efficient and secure way to access the gold market.

If you buy any of the ETFs that mentioned above, indirectly you own the equivalent one-tenth of an ounce of physical gold. If the demand of these ETFs are high, the issuer must back the stock by acquiring more physical gold . Similarly, when ETFs sellers more than buyers, then the issuer must then redeem the gold equivalent and convert it into cash to the seller.

3. Exchange Traded Notes (ETNs)

ETNs is an unsecured debt security which issued by an underwriting bank. ETNs are traded on an exchange and can be shorted. ETNs have a maturity date and are backed only by the credit of the issuer. Similar to index funds, they are linked to the return of a benchmark index. But as debt securities, ETNs don't actually own anything they are tracking. The popular list of gold ETNs currently available in the US are E-TRACS UBS Bloomberg CMCI Gold ETN(UBG), PowerShares DB Gold Double Short ETN(DZZ), PowerShares DB Gold Short ETN(DGZ) and PowerShares DB Gold Double Long ETN (DGP).

What is ETNs ?

ETNs are high risk debt securities that issued by a underwriting bank. The first ETN was issued by Barclays Bank PLC on 12 June 2006. The returns of ETNs are closely associate with market benchmark index less investment operational fees , in our case here ETNs tarack gold's spot price. ETNs are different from ETFs due to ETNs don't actually own anything they are tracking, so it is a high risk game. Invest in ETNs could lose all your money if the benchmark index under perform or the underwritting bank goes bust.

4. Miners

Gold-mining stocks is a riskier way to invest in gold because they trade with the broader equity market and it is subjected to speculation. Miners with strong production and reserve growth are the main conderation for picking gold stocks.

Don't buy small gold miners that are in the exploration phase with low cash flow, without sufficient cashflow it is diffiult for gold miners to sustain their business. The net profits go slim if the cost of producing an ounce of gold and gold price continuously rising.

In conclusion, there are three Golden Rules when you come to Investing .

1) Know who you are before you start investing in Gold that have risk - don’t use the marketplace to find out.

2) Know why you are buying gold - don’t wait until its price goes up or down , seize the opportunity then the time is right.

3) Take your time - Don't rush into it, because it takes time to learn how to invest.


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