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Saturday, May 13, 2006

Gold

Gold has been consistently rising in value for the past year or so now and there seems little likelihood that this trend will diminish.

A number of reasons have been put forward for this sudden and dramatic rise. War, economic uncertainty, China and even India have all be assigned responsibility at one time or another. Even inflation and national debt, both which currently run extraordinarily high in the western countries, have had the finger pointed at them.

Regardless of the possible reasons for the steady rise in value of gold, it can be said with some certainty that gold is considered a good investment and a safe haven for one’s assets.

What gold should one buy and keep?

There are many types of gold one can buy.

One can invest in Gold Exchange Traded Funds (EFTs). EFTs are simply a certificate that represents a portion of gold held in a bank vault. One purchases a specific amount of gold and receives a certificate to establish one’s holding. As the price of the gold in the vault changes, the value of one’s holding changes correspondingly. The advantages of this system are that one can buy gold at virtually spot price. The disadvantage is that it is considered an investment and there are tax considerations such as profit taking and capital gains to consider.

One can buy Gold Stocks. Investing in the shares of a gold mining company can be profitable but the value of the shares depends on many factors, not just the value of gold. A mining company is projecting to produce a certain amount of gold over the life of the mine and this is what give it its value. If the mine falls short then the share value can fall short. Even an adverse movement in the currency exchange rate of the country in which the mine is situate can cause a drop in the value of the gold bring produced by the mine.

Gold Futures is another method of buying gold. Usually this is the arena of the trader rather than the investor, it is still a possibility but one fraught with danger as it is very easy to lose a lot of money trading in gold futures. This area is best left to the experts.

Buying Gold Bullion, such as gold coins or gold bars, has some advantages in that coins generally are legal tender and not taxed. They are easy to carry and store and also easy to dispose of or sell. Gold bars also have some advantages. Easy to carry, store and sell also. Sometimes there may be tax considerations with gold bars depending on the purpose declared for their purchase. When buying gold bullion also consider that there is an increase in price, above the spot gold price, as the dealer or supplier needs to pay for their expenses etc. However with the steady increase in value this may not be such a problem.

Gold has traditionally always been a good buy in any market and better in an uncertain market.

Probably a regular purchase of gold on a consistent basis might be a wise move, then the price one pays will tend to level out and with the current trend you will surely do well with your gold.

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