How to Invest in Gold and best way to investment in gold

How to Invest in Gold and best way to investment in gold : Physical gold is always attractive. As a matter of fact gold serves a kind of asset that will depreciate or appreciate in value. Analyzing the current trend in the investment market, investing in gold bars is quite a positive strategy because gold bars are available in KDM, HallMark standards in terms of purity and copper mixing ratio. Hence these gold bars can be converted into cash or ornaments in future based on the needs and this can be considered as a best way to invest in gold.



The future growth is going to be seen in gold. The world economy may remain off the gold standard, but ultimately the tangible value of gold as the basis for real value-whether acknowledged by central banks or not-will never change. Historically, this has always been the case, and it always will be. In other words, we are on a “gold standard” in spite of the popularity of fiat. Gold prices forecast 2012



top three reasons to invest in gold in 2011

It’s not just the looming threat of inflation that’s driving up gold prices, though. A number of factors have collided since the start of the year to cause gold prices to rise, and that’s got analysts and newsletter writers arguing that the bull market in precious metals still has legs. Here’s a run-down of the top three reasons to invest in gold in 2011:



1) Protection.

In the face of global currency debasement, there are few remaining places left where investors can safely stash their cash. As the value of the dollar, the Euro and the Yen fall concurrently, the price of gold and other hard commodities including oil rises. Gold not only acts as a hedge against debasement but it’s also a tangible store of value. If we do face further geopolitical turmoil or natural disasters, gold should help protect your assets no matter what direction fiat currencies move in the short-run.



2) The Federal Reserve.

So long as investors can smell the faintest whiff of QE3 in the air, they’re going to be wary of hunkering down in cash. QE2 has been a boon to gold prices, and QE3 could compound those gains by weakening the dollar so severely that investors and foreign investors run from it. Indeed, that will make U.S. exports more attractive on foreign exchanges, but it will no doubt ratchet up fears of inflation. Inject an economy will enough cash, and money velocity will start to rise. That’s when we run the real risk of forming bubbles, and my bet is the next bubble could be in precious metals. If you think we’re already in the midst of a gold bubble, wait to see what happens if the Fed announces plans to proceed with yet another round of quantitative easing after QE2 wraps up in June. Even the threat of QE3 has investors nervous.



3) Demand abroad.

It’s tempting to look at the gold and precious metals markets from a distinctly American point of view, but much of the demand for physical gold and silver is also being driven by foreign markets. Investment demand for gold in China rose 84 percent in the fourth quarter of 2010, according to Money Morning, and that demand could keep growing there and in India as the expanding Middle Class in both countries is already living with high inflation. Should that inflation spike higher, expect gold prices to follow.



Best Ways to Invest in Gold

In the following paragraphs, you’ll discover five ways to invest in gold. Based on your level of market experience and familiarity with products, one of these will be appropriate for you.



1. Direct ownership. There is nothing like gold bullion, the ultimate expression of pure value. Historically, many civilizations have recognized the permanence of gold’s value. For example, Egyptian civilizations buried vast amounts of gold with deceased pharaohs in the belief that they would be able to use it in the afterlife. Great wars were fought, among other reasons, to pillage stores of gold. Why the allure? The answer: Gold is the only real money, and its value cannot be changed or controlled by government fiat-the underlying reason for governments to go off the gold standard, unfortunately.Gold’s value will rise based on the pure forces of supply and demand, no matter what Mr. Greenspan decrees regarding interest rates or greenbacks in circulation. The big disadvantage to owning gold is that it tends to trade with a wide spread between bid and ask prices. So don’t expect to turn a fast profit. You’ll buy at retail and sell at wholesale, so you’ll need a big price jump just to break even. However, you should not view gold as a speculative asset, but a defensive asset for holding value. Since your dollars are going to fall in value, gold is the best place to preserve value. The best forms for gold ownership are through minted coins: one-ounce South African Krugerrands, Canadian Maple Leafs, or American Eagles.



2. Gold exchange-traded funds. The recent explosion in exchange traded funds (ETFs) presents an even more interesting way to invest in gold. An ETF is a type of mutual fund that trades on a stock exchange like an ordinary stock. The ETF’s exact portfolio is fixed in advance and does not change. Thus, the two gold ETFs that trade in the United States both hold gold bullion as their one and only asset. You can locate these two ETFs under the symbol “GLD” (for the streetTRACKS Gold Trust) and “IAU” (for the iShares COMEX Gold Trust). Either ETF offers a practical way to hold gold in an investment portfolio.



3. Gold mutual funds. For people who are hesitant to invest in physical gold, but still desire some exposure to the precious metal, gold mutual funds provide a helpful alternative. These funds hold portfolios of gold stocks-that is, the stocks of companies like Newmont Mining that mine for gold. Newmont is an example of a senior gold stock. A senior is a large, well-capitalized company that has been around several years and has a profitable track record. They tend to own established mines that produce known quantities of gold each year. For many investors, selection of such a company is a more moderate or conservative play (versus picking up cheap shares in fairly young companies).



4. Junior gold stocks. This level of stock is more speculative. Junior stocks are less likely to own productive mines, and may be exploration plays-with higher potential profits but also with greater risk of loss. Capitalization is likely to be smaller than capitalization of the senior gold stocks. This range of investments is for investors whose risk tolerance is broader, and who accept the possibility of gold-based losses in exchange for the potential for triple-digit gains.



5. Gold options and futures. For the more sophisticated and experienced investor, options allow you to speculate in gold prices. But in the options market, you can speculate on price movements in either direction. If you buy a call, you are hoping prices will rise. A call fixes the purchase price so the higher that price goes, the greater the margin between your fixed option price and current market price. When you buy a put, you expect the price to fall. Buying options is risky, and more people lose than win. In fact, about three-fourths of all options bought expire worthless. The options market is complex and requires experience and understanding. To generalize, options possess two key traits-one bad and one good.



The good trait is that they enable an investor to control a large investment with a small, and limited, amount of money. The bad trait is that options expire within a fixed period of time. Thus, for the buyer time is the enemy because as the expiration date gets closer, an option’s “time value” disappears. Anyone investing in options needs to understand all of the risks before they spend money. The futures market is far too complex for the vast majority of investors. Even experienced options investors recognize the high risk nature of the futures market. Considering the range of ways to get into the gold market, futures trading is the most complex and, while big fortunes could be made, they can also be lost in an instant.



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