Personal Finance

Gold Investment Insights

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By Hayden Wragge

We have all felt a little twinge of jealousy when a friend talks about how they have been on an exotic holiday, bought a stylish car and paid for a lavish extension on their house – all in a very short space of time.

However, when David’s friend spoke at great length about his new set of wheels, rather than feel envious, he decided to ask how he managed to afford his luxurious lifestyle.

The friend explained that he’d inherited a modest amount of money some years earlier and had invested it carefully in several different assets and the returns from his investments now served as a welcome top-up to his earnings.

Intrigued, David began to research the investment options available to him. “I had some savings in a high-interest savings account,” David explains, “but since the recession began, the amount of interest I have been making has dwindled to hardly nothing. In fact, with the rate of inflation making everything so expensive, my money was worth less than when I first paid it into my account.”

David looked into investing his money in property. However, he just didn’t feel confident enough that house prices would rise in the long-term and he was equally concerned about investing in shares in a company after even large businesses have been seen to fail in recent years.

Investing in gold as a beginner

Then he heard about the new gold rush. Gold is perceived to be a safe haven for investments because its price historically tends to remain stable or rises – even in economic downturns. “I was interested to hear that buying gold is a much more stable investment,” David says. “It might not offer instantly high returns like the stock market can if you get incredibly lucky, but then it does not come with such high risk either. I wanted an investment that offered me a sure and steady return so I felt safe that all my money was not going to disappear overnight.”

Different ways to buy gold online

David looked to buy gold online and found that several companies allowed him to invest this way and that he could invest in gold coins such as bullions, gold bars, gold funds and exchange traded commodities. After researching the options available to him and taking advice from a financial advisor, David decided to go for a varied portfolio of gold investments – with half his money invested in gold bullions and half in exchange traded commodities. Bullions have seen a surge in interest since the recession began in 2007, with London dealer ATS Bullion reporting that business has tripled in that time period. The high demand has led to a shortage of coins, so many people have been investing in gold bars instead. However, David wanted to pay the extra premium for bullions because he felt that if they were in demand now, there was a chance that they might be worth more in the long run. He also invested in exchange traded commodities, which work much like a tracker fund and track the direction of the gold market. With a gold exchange traded commodity, the value of your investment goes up and down in line with the gold price. David decided to split his investment so that he could own liquid assets as well as physical gold.

A sure and steady rise in value

Over the last two years, both his bullion and the exchange traded commodities have seen a steady increase in value, but David intends to hang onto them for the time being. “The experts predicted that the value will continue to rise until at least the year 2014,” he says, “so I’m holding onto my investments for now and I will keep taking advice as time goes on.” It is worth remembering that the value of all investments can go down as well as up and you are never guaranteed to make money. But David found that investing in gold was a safe and steady investment that so far has certainly paid off for him.

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