Since the credit crunch and banking crisis, the financial markets are no longer sure-fire ways of making money. Stocks, shares and even government bonds are all looking shaky, while the more secure investment opportunities such as placing your money into savings accounts yields very little interest. However, one area of investment that still yields large profits and is incredibly stable is the buying of precious metals, in particular, gold and silver.
In 2001, gold cost just under £160 per ounce ($250). It has now reached just over £1,100 an ounce ($1,750) and is still climbing. The same is true of silver, which has gone from just over £3 an ounce ($5) in 2001 to a peak of over £30 ($50). Precious metals such as gold and silver have been the best performing assets for several consecutive years now and with the current difficulties with the Euro and lack of economic growth across Europe the UK and USA, gold and silver prices look set to continue rising.
The Market
While both gold and silver prices vary day-to-day, the general trend for the last ten years has been upwards. So putting your money into gold and silver is a wise investment, but it’s worth understanding how the precious metals market works before taking the splash.
Gold, silver and other precious metals are regarded as stable assets by investors, but that doesn’t mean that their prices can’t drop. Successful investment in anything is about diversification and not putting all your eggs in one basket. This means that if you are considering investing in gold, silver or other precious metals, it’s wise to spread your investment rather than just throw it all at the one commodity.
It’s also important to know when to invest in gold or silver. While the general price trend has been upwards, gold and silver prices vary day to day. Choosing a time when prices are relatively low, means there is more chance the price will rise, which will get you a return on your investment. The financial press or business pages of your regular newspaper usually contain daily information on what the price of gold and silver is doing, which is worth studying to help you know when is best to invest. It’s also important to keep abreast of the prices when you have eventually invested your money, so you know when it is the best time to get it out again.
Type of Investment
You don’t need to fill your house with gold or silver bullion bars and coins to invest in precious metals, although this is one option. Gold and silver can be bought like any other commodity on the financial markets, and there are a number of ways of making investments:
• Buying physical gold. If you have a safe or safety deposit box, buying bars and coins is a simple way of investing in gold or silver. You can simply keep them until prices start to fall and then resell. You will of course have to pay commission on any sales, so it is important to factor this in with any investment.
• Gold accounts. Several offshore banks offer bank accounts that enable you to turn cash into gold. In essence, when you put money in, the bank changes it into gold and stores it for you, converting it back when you want to get your investment out.
• Trade funds. Gold and silver can be bought and sold through the stock exchange. As with other stocks and share trading, you need to get a stockbroker to make the transactions for you, who will of course, charge commission.
• Spread betting. Rather than investing directly in gold and silver, spread betting allows you to bet on the rise and fall of gold prices. This allows you to speculate on gold and silver without actually owning it.
• Investing in mining: Another way of investing in gold and silver is to buy shares in the mining companies that dig it up. When prices of gold and silver are high, the values of these companies rise, but you can make money on mining companies in other ways too, as acquisitions, mergers and the discovery of new precious metal deposits all affect their share price.
Other Metals
Gold and silver are not the only precious metals that provide a stable and low risk investment. Other precious metals such as platinum and palladium also offer potential investors a good return on their money. Furthermore, even non precious metals such as copper, tin and iron have all seen large price rises in the last few years and could provide the wise investor with good yields.
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