Archaeologists report that mankind began to use gold as money in the middle of the 4th millennium BC . From about the same time, the yellow metal began to be considered as an investment object.
Over the past time, the situation has not fundamentally changed, people continue to invest in gold, only the list of possible methods has expanded. Investments in precious metals are no longer limited to buying a physical ingot and storing it.
There are many ways in which you can buy gold. At first glance, it may seem that there is no difference between them: gold is gold. But, if we take into account all the features: taxes, fees, risks, the reliability of investments – a significant difference appears.
How to invest in gold bars
The easiest way for an individual to invest in gold is to buy bullion .
Bars are sold through both certified shops and banks. The latter have a higher spread (the difference between the value of the bullion when sold to a client and the subsequent redemption).
In addition to shops and banks, there are local markets that sell “secondary” gold bars – in this case, resale is between individuals. An example of such a site is bullionexchanges.com , swissbullion.com , where you can also sell them. There is a full-fledged gold bullion market. Weight starts from 1 gram.
When buying, you should pay attention to a number of nuances :
- Do not purchase heavy bars weighing more than 100 g. Subsequent resale will be difficult and will reduce the initial cost.
- Storing bullion at home is not safe.
According to experts, it is necessary to buy metal at a time when the price for it has dropped to a five-year minimum. Such investment allows you to preserve savings in the best quality during the crisis.
As for banks, the disadvantage of buying through them is the loss on resale. The difference between the sale and subsequent redemption price reaches 30-40%, for example, Sberbank offers just such courses. If an investor purchased an ingot and wants to sell it to the bank in 1-2 days, he will lose 30-40% of the investment during this operation. With private companies, the situation is about the same, but the spread is slightly lower.
The main advantage of physical gold bars is independence from exchanges and banks. Precious metals can be stored in a safe and exchanged for fiat currency at any time. In times of crisis, the yellow metal protects capital from inflation.
Disadvantages of Gold Bars :
- The need to store them. You will have to rent a safe deposit box at the bank – these are additional costs;
- Possibility of losing documents. If there is no certificate for the ingot, the bank (company) will appoint an examination when buying the precious metal, the seller will pay for it, not the buyer;
- Markdown for physical damage;
- Large spread. Reviews prove that this is a massive phenomenon, all banks and certified companies give an unfavorable ratio of selling and buying prices;
- In some countries, the tax on the purchase of bullion is not canceled.
How to invest in gold coins
According to the estimates of the auction participants, the growth rate of the cost of coins for the year is at least 15%. They are steadily adding in price, the demand for them does not decrease, which confirms the fact of a profitable investment.
Investment gold coins are issued by the Central Bank and are sold under the guise of capital investment. They have a number of features:
- In most cases, a simple, uncomplicated pattern is applied to them.
- The type of metal, its weight, denomination and fineness are mandatory indicated. The real value differs significantly from that indicated under the guise of par. For example, a 50-ruble gold coin costs more than 30,000 rubles .
Compared to bullion, physical gold of this type is not taxed upon purchase (example – Russia). Investment coins are sold both in banks and in certified companies.
Both banks and private companies retain the spread when buying and selling coins, but for companies it is lower, sometimes the investment coins themselves are somewhat cheaper. The spread is acceptable, for example, at Alpari for George the Victorious (weight 0.25 troy ounces), the difference between the selling and buying prices is about 6-10% . This difference persists regardless of the course of the yellow metal.
Remote purchases are possible, it is not necessary to go to the Alpari branch. Each coin is supplied in a special package, along with accompanying documentation.
It is advisable not to open the package at all and not to touch the coin or to do it with special gloves. Companies and banks reduce the buyback prices for both physical damage and deterioration in the appearance of the coin.
Buying investment coins is no more difficult than ordering goods through an online store. On the Alpari website , the desired coin is selected and added to the basket. At the next stage of ordering, the buyer’s data is indicated, the cost of the goods is transferred to the company’s current account, Alpari sends the order to the specified address.
Regardless of whether you invest in bullion or coins, this is a long-term investment. It makes no sense to buy investment coins and sell them in a couple of weeks. The growth in the value of the precious metal is unlikely to compensate for the spread.
How to invest in anonymous metal accounts
An impersonal metal account (OMC) is an analogue of a regular bank account, but instead of rubles or dollars, it is opened in grams of precious metal. Banks offer to open compulsory medical insurance for amounts from 0.1 grams.
Unlike the purchase of bullion or other physical metal, the depositor does not receive anything in his hands except the contract. In fact, he becomes the owner of a ” virtual ” amount of gold with a weight equivalent to the amount of his contribution.
The rates are updated daily, according to them, the process of buying and selling between the client and the financial institution is carried out.
The cost of gold depends on the bank spread (the difference between the buying and selling rates), in most cases it is 8-15%. Because of this, making real profits is possible only with long-term deposits for several years. Short-term investments will not only turn out to be useless, but can also turn out to be unprofitable.
Before investing money in gold, pay attention to some features:
- Deposit insurance does not cover most of the unallocated metal accounts. Therefore, it is recommended to use the services of reliable banks (VTB-24, Sberbank).
- The gold rate is set by the financial institution in relation to the price tags approved by the Central Bank. In most cases, it differs from it by a few percent (sometimes this amount is significant).
How to invest in the gold mining industry
According to reports World Gold Council ( World Gold Council ), the aggregate demand for the metal is growing with remarkable stability (4%), although the yield is only 1%.
Whether it is worth investing in gold at the stage of its production or not is up to you, but the same WGC shows that the shares of enterprises in 2019 grew by 37% , and the metal itself – by only 12% . This trend has persisted for decades.
So, in the first three quarters of 2020, shares of Russian Polymetal outperformed gold by almost 5 times in profitability. Companies such as Newmont Corporation, Anglogold Ashanti, Russian Polyus, Barrick Gold Corporation also yielded better yields than precious metals.
PJSC Polyus is unconditionally in the lead on the Russian gold mining market . It accounts for almost 20% of Russian metal, the fifth largest in the world in terms of total production. The company’s advantage is that it is engaged in “open-cut” mining, the price of which is significantly lower than work in mines.
The strong growth in securities of Russian companies is partly due to the fall in the national currency. Polyus is not the only gold mining company in Russia, but its shares have shown record growth over this distance.
Another largest Russian gold miner, investing in shares of which will bring net income, is Polymermetal . The company is a holding company that specializes not only in gold, but also in the extraction of silver and copper. In 2018, it was the only Russian company included in the Dow Jones Sustainability International Sustainability Index.
Before buying shares, you should pay attention to the fact that not all gold mining companies in Russia are stable and prosperous. For example, PJSC “Lenzoloto” in 2019 worked at a loss, and PJSC “Yamalzoloto” was under the threat of bankruptcy.
Consider the fact that some companies (for example, Polymetal) pay dividends in dollars. Therefore, you have to convert into rubles or transfer to the foreign exchange account of a Russian broker for subsequent reinvestment.
The strongest among foreign companies are:
- Newmont Goldcorp (TSX: NGT, NYSE: NEM);
- Barrick Gold (TSX: ABX, NYSE: GOLD);
- AngloGold Ashanti (ASX: AGG, NYSE: AU, OTC: AULGF);
- Kinross Gold (TSX: K, NYSE: KGC);
- Newcrest Mining (ASX: NCM, OTC: NCMGF)
- Goldcorp (TSX: G);
- Freeport-McMoRan (NYSE: FCX);
- Polyus Gold International (LSE: PGIL);
- Gold Fields (NYSE: GFI, JSE: GFI);
- Randgold Resources (OTC: RNDXF);
- Yamana Gold (TSX: YRI);
- Eldorado Gold (TSX: ELD, NYSE: EGO).
How to invest in gold through funds
Exchange Traded Funds ( ETF ) is an option for lazy investors. Gold exchange-traded funds are of 2 types:
- ” Gold ” – in them, each fund’s shares are backed by a gold reserve. Physical bars are stored in real banks and are regularly audited to confirm them. Examples of such funds are SPDR Gold Shares (GLD), VanEck Merk Gold Trust (OUNZ), GraniteShares Gold Trust (BAR), Aberdeen Standard Physical Gold Shares (SGOL). Those who doubt whether to invest in gold because of the high spread can work with shares of similar exchange-traded funds. Their shares are traded on the stock exchange, there is no difference between Bid and Ask by tens of percent. There is only a meager management fee, which is taken by the ETF provider for services on regular portfolio rebalancing and other items of expenses;
- ETF built using securities from miners of gold and other precious metals. Examples of such funds are VanEck Vectors Gold Miners (GDX), VanEck Vectors Junior Gold Miners (GDXJ), iShares MSCI Global Gold Miners (RING), Direxion Daily Gold Miners Bear 2X (DUST is an ETF with embedded x2 leverage).
For long-term investments, ETFs are ideal. When working with them, the investor will not face a large spread, he does not need to store metal and certificates, or to carry out expert examinations. As for the tax, you only have to pay the standard income tax, this is done only when funds are withdrawn from the brokerage account.
Is it worth investing in gold jewelry
If you invest in gold in the form of jewelry, it must be borne in mind that metal is used for their manufacture, not of the highest standard (999.9), as in ingots or coins, but consisting of alloys (585).
Statistics show that more than 15% of Russians are confident that such an investment is profitable. The experts in this area are not. In their opinion, the acquisition is justified in the case of buying products that have not only their own cost, but also cultural or historical value.
Choosing such jewelry to preserve capital has several advantages:
- The price of gold is steadily growing upwards, and the likelihood of a decline is almost impossible.
- Simultaneously with the increase in the cost of metal, the price of work increases.
This condition is only valid for exclusive items. Ordinary rings, cufflinks, earrings or chains will return you money invested in them no earlier than in a few decades.