Investing in gold can be a profitable strategy, as its price increases over time due to constant demand. It is important to understand the factors that influence the value of gold and the forms in which it can be bought. Here are some tips on how to invest in this precious metal.
Steps
Step 1. Choose your form of investment
- Gold bars are a real unit of measure for gold. Buying bullion is one way to invest in gold, as you can buy shares of gold investment funds, called ETFs, that represent them on the stock market. Gold bars have a value very close to the market value.
- Gold shares can be bought individually from an intermediary or as a group through ETF funds.
- Mining stocks are valued according to the demand for gold and the value of the companies that mine it. The value of these shares depends on supply and demand.
- Gold in Futures is a security on which the investor agrees but does not pay until a set date. This gives the investor time to speculate on gold's performance and options to trade it until the set date to make a profit.
Step 2. Know the factors that influence the price
- The Washington agreement on gold, known as the WAG, sets a limit on the amount of gold that can be sold or bought by individual countries. Countries that want to expand their gold reserves will experience an increase in demand. The need for a state to increase its reserves will cause the price of gold in its territory to rise.
- The state of a country's economy directly affects the value of gold. The downturns in the economy cause gold to be sold for cash, increasing its availability and lowering its price.
- Crises and wars increase the demand for gold for fear of currency devaluation. Investors buy gold to protect themselves from the economic crisis and this raises its price.
Step 3. Evaluate the interest rates
The demand for gold, silver and precious metals will increase when interest rates on bonds, real estate investments and equities do not pay enough for investors. Low or negative interest rates are good indicators of a growth in the price of gold
