Despite its occasionally massive price fluctuations, gold makes a nice secondary investment. But getting in at the right time is crucial. Short-term investors will ride that occasional wave, buying low and selling it off when the price is high. While that’s tempting, during those wild times it’s easy to lose a lot of money in the gold market. Gold investments are recommended only after you put money elsewhere, and Money Week recommends limiting your gold investments to 15 percent of your portfolio at most.
Real Gold or Paper?
Investing in gold shares basically gives you certificate that says you own a certain amount of gold. You don’t actually take delivery of the metal. According to the Invest In Gold website, gold shares are safer and easier to manage than physical gold. Transactions are made through an investment broker, and buying the physical gold puts the material in your hand. While that creates storage problems, this gives you something you can trade.
When buying physical gold, you need a place to store it. A safety deposit box or home safe is the best option. When buying raw gold, pay attention to the weight and purity. Most ingots are marked with both, and sometimes with the smelter's logo. Gold is heavy; a one-ounce ingot of the pure metal is not much bigger than a cigarette butt.
It's All About the Weight
Weight determines the value when buying or selling gold; it does not matter how beautiful or well-made the item is. Prices are governed by the spot price. In the United States it shows up on the commodity exchange board. Most specially-minted gold tokens such as the American Eagle or Canadian Maple Leaf weigh one ounce, though smaller fractions are available. Precious metals use troy weight, with 12 ounces to a pound or 31.1 grams each. This is heavier than the more familiar avoirupois weight, with 12 ounces to a pound at 28.3 grams each.
Purity and Markings
Gold ingots are usually marked with the weight and purity; “999” signifies pure gold. You can sometimes buy or sell those without the dealer having to test them. With jewelry and other gold items, the purity is measured in karats. Most American jewelry comes as 14 karat, meaning 58 percent of its weight is in pure gold.
Al Bondigas is an award-winning newspaperman who started writing professionally in 1985. His print credits include the "Mohave Valley Daily News" and "The Mohave County Standard." Bondigas studied journalism at San Bernardino Valley College in California.