martedì 22 novembre 2011

The Pros and Cons of Investing in Gold

Precious metals have always been an investment worth looking at given their high return and alternative choice to conventional stocks. When it comes to gold there are many pros and cons that should be considered. During a bear market, gold is often a home run as it basically stands on its own, rarely affected by market fluctuations or tethered to common industrial markets. However, volatility can be cause for concern as trading is affected by a barrage of global calamities that can easily alter the gold index. Before dumping all you have into this age old metal, consider both sides of the golden coin.

Pro – Gold holds its value longer and stronger than many other investments. Since 2001, gold has risen one hundred and fifty percent.

Con – If you invest in physical gold directly you will need to rent a secure location such as a safety deposit box or storage facility.

Pro – Owning physical gold more often than not will guarantee secure wealth in an economic disaster.

Con – Allocated gold (specific, numbered bars allocated to you) charge an annual storage and insurance fee that adds up over time.

Pro – Gold will never lose its value.

Con – If you are looking for a fast turnaround gold is not a candidate. It is a buy/hold investment.

Pro – Gold does not degenerate over time making it a stable metal which maintains its value. It will never tarnish, corrode or rust.

Con – Gold is not an investment but rather a hedge on wealth.

Pro – This metal is traded on emotion known as the fear and love trade by Frank Holmes, CEO/CIO at U.S. Global Investors (a San Antonio investment fund). These two emotions cover both ends of the trading playing field.

Con – If interest rates rise two or more percent higher than inflation, gold has been known to drop in value.

Pro – The WGC (World Gold Council) reports that gold is not a credit risk, it has no attached liability.

Con – Traditional brokers should not be used when investing in gold.

Pro – According to portfolio manager Mark Johnson of the USAA Precious Metals & Mineral Fund, on investing in gold mining, “…you probably have to put two times as much money into bullion or ETFs (exchange-traded product) to get the same exposure to gold as you do with mining shares.”

Con – Unallocated accounts (you are assigned gold but do not obtain tangible possession) are often all under one company’s name. This means that if that company missteps, your gold can be confiscated.

Pro – Cloud gold is owning gold certificates digitally (although you actually receive a physical certificate) which can be more cost effective, especially for day traders.

Con – The taxes can sometimes double conventional stock trades on account of gold being considered a collectable by the government.

Investing in gold is a risk that carries with it great rewards, if done properly. Start small and work with what is right for you to get the most out of this potentially successful asset.

About the Author: Matt Tomasino is a full-time professional writer who enjoys following the stock market and studying investments. He has a particular interest in energy and minerals and can regularly be found checking the news at Eagle Ford Shale Texas and other major sites.

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