The first rule of thumb whenever you purchase gold should be placing a fixed amount of money every month towards your goal regardless of the price. This strategy, for the average investor, spreads the risk out over time, therefore, lessening the downside.
Most gold financial advisors believe it should be anywhere between 3%-10% in gold. Managers who are more bullish recommend an allocation which is as high as 20%.
Inflation and gold as a hedge against it
Gold is an insurance against currency debasement, inflation, and global uncertainty, it is protection. Here are four ways in which you can invest:
Buying Gold Bullion as an investment
Purchase physical gold at various prices: jewelry, coins, and bars. The American Eagle, American Buffalo, and St. Gauden´s are some of the most popular gold coins, that you can store gold in your home or in bank safety deposits, You can also sell and purchase gold at your local jewelers. There are companies such as Kitco.com which allow you to store your gold with them and trade the metal.
Avoiding big markups for gold coins and bullion
Avoid big premiums when you purchase gold coins or bullion. You want to purchase gold that’s as close as possible to the spot price, or at the most at a 10% premium. The higher the premium, the higher the price of gold must rise for you to profit.
Typically the coins originate from the national mint, there they are made and sold at a markup of 4% — 1% to 3% is the retailer’s margin.
The way you calculate a gold product´s premium is by subtracting the spot price from the price which you have been quoted that number is divided by the spot price and then multiplied by 100.
Let’s say you purchased a gold bar at Kitco.com that is one ounce for the price of $1,255.90 — the spot price used is $1,200 — the bar’s markup is 2.1%. What this means is that the price of gold must only rise 2.1% from the spot price levels in order for you to have broken even on your investment.
Premiums, however, are able to mount as high as 75%, or based more on the item of gold. To avoid paying fees like that, you should follow the strategy outlined in the gold and silver for life review.
To avoid being ripped off, you have to determine why you want to purchase gold bullion. If you are seeking to own gold as a long term investment, then purchase the gold as close as possible to the spot price.
If you are looking to own golf you utilize as money, if you are a “survivalist” and as Jon Nadler, Kitco.com´s senior analyst says, you want to buy a tank of gas with gold, then you require gold coins that are smaller, like one then per ounce and you will be required to pay the premium.
It is Nadler´s opinion that an individual investor, when purchasing gold should not invest over a 10% markup, he, however, acknowledges “that every individual has a threshold of their own.”
Another area in which investors tend to go at astray is when purchasing numismatic or semi-numismatic coins, also referred to as rare coins, these come with immense premium which seldom ever recoup their value.
Leaving rare coni purchasing to rare coin dealers is a great rule of thumb. It is Nadler´s advice the consumer who is interested in rare coins seek the assistance of Christie´s, Bowers & Merena, or other professional auctioneers who have expert staff and are able to objectively grade the coin as goods would be appraised by an antique dealer.
If you are sold a story with the coin by the broker, for example, it is from an “ancient world and there are a mere thousand that exists” it is the advice of experts that you go elsewhere.
Nadler cautions; “never confuse with what is the gold investment with what is being sold as gold investments. Look for something which tracked the price of gold as closes as possible to the dollar to dollar.”