Gold Bullion or Mining Stocks

There are two ways to invest in gold. One is buying the physical metal like gold bullion and the other is investing in Mining stocks and shares. On the investment pyramid of risk, physical ownership of gold would be on the lowest tier (least risk) with cash and life insurance, while ownership of gold mining shares would be classified on the second or third tiers (higher risk) depending on whether you own a major gold producer or a junior mining company.

In general terms, owning physical metal is more of an investment (savings) while owning mining shares would be considered more speculative. However, with increased risk comes greater opportunity for return, it is always recommendation to own some of both. During a bull market in gold, the physical metal prices will go higher, but the gold mining shares are leveraged to the physical price. In other words, as the price of gold rises, profits from mining stocks rise more in percentage terms.

Is this the Best time to Invest in Gold?

The demand for gold will rise when the condition of a country is
uncertain and when inflation rate is high. In such condition gold is thought as safest investment. When high inflation occurs, there is a possibility of the price of gold to rise higher than inflation rate. Statistics showed, when inflation rose 10 percent, then the price of gold would rise 13 percent. If inflation rose 20 percent, gold would rise to 30 percent. However, when inflation 100 percent, then gold price will jump to 200 percent.

One also needs to note that, the price of gold will tend to be constant when low or negative inflation occur. However, gold investment also had several weaknesses. Several of them are as follows:

1. Not practical
The prospective investor must also consider that buying gold is impractical.

2.Difficult storage and handling
When the storage is poor, oxidation process can occur and it can change the colour of gold. The storage of gold in huge amount often is not enough to be placed in the house. The investor could lease safe deposit box available in banks for consideration of the security, Gold tended to be the speculation implement because did not produce revenue stream. The value of gold only depended on the perception that is easy changed.

3. Risk of loss, being stolen or robbed
The Investment return is relatively stable and not more stimulating when being compared by the share or property. Gold investment also really is not suggested for short-term investment because of it's hedging characteristic. We had better not keep physical gold when investing. Generally the form of gold is bar resembled coal, 95 percent (22 rust) or 99 percent (24 rust).

This kind is thought as the most beneficial for investment because when it is sold, the price will follow international standard. The other form is coin shape. There is also gold that has the shape of jewellery. This form in fact not more beneficial for investment because the investor must bear the price of the production and the model of jewellery is subjective. There is also bank that has gold savings product. To buy and sell gold could be carried out in the jewellers shop.

As for whether it is the right time to buy gold, experts are still suggesting the prospective investor to wait and see. The market is still fluctuating, so it's better wait and see before deciding to buy gold. However if you will invest for long period, you may buy gold at this moment.

Guide Discussion & Comments