Today’s extreme economy has created a boom for those who have always invested in gold. The price of gold has increased sharply over the last ten years. Investors who buy gold bullion, and who have followed sound investing advice have realized a huge profit. Gold is considered a safe investment because it acts as a guard against inflation. Gold is one of the few iconic trade items because it is both a commodity and a currency. Another important aspect of gold investing and gold pricing is that the price of gold is set in American Dollars. The value of the American dollar affects the price of gold.
Buy Gold Bullion – Understanding Price:
The price of gold changes on a daily basis. Gold prices are set by the New York Mercantile Exchange. Most investors work off of the spot price of gold. This is determined daily during the last two minutes of trading. The spot price of gold is an average of the lowest price and the highest price that occurs during the last two minutes of trading. Once the exchange is closed the spot price is determined and then posted. This will be the opening price used to to Buy Gold Bullion bars on the next trading day.
There are a few rules to consider before buying gold bullion bars. Expert investors agree that, for long-term investing a portfolio should have an investment between 3% and 10% of gold. Gold as an investment has always been considered a hedge against the forces of inflation. This is true because gold is recognized around the world as a currency and not just a commodity. To clarify this statement we can compare the value of a stock to the value of gold. Even if both the stock and the gold were bought for the same amount of money. If inflation is added to the equation the cost associated with the stock goes up and the value of the stock goes down. This is because it takes more money to produce common goods and the price of common goods begins to rise. In investment terms, when cost rise, the amount of profit drops, and the value of stocks usually fall. We use the word usually here because there are a few exceptions to this rule. Gold, on the other hand, has the opposite effect. If inflation hits the US economy and the price of common goods rises, the value of gold rises too. This is directly related to the value of money. When inflation rises the value of currently usually drops. This means that it takes more money to buy the same amount of goods. Unlike the stock we were comparing, gold is both a commodity and a currency. So when the value of the US Dollar falls the cost of gold goes up. This is because it takes more currency to buy the same amount of gold. When the price of gold goes up, gold becomes a more profitable investment. Unlike stocks, which typically lose value when money is debased or becomes worth less than it was, gold rises in value. This is how it protects a portfolio against inflation. This is also why many experts claim that gold is a safe investment.
Buying Gold Bullion – Investment Strategy:
Investment strategies can be divided into two groups. The first group are those investments that are considered a long-term or holding investments. The second group of investments are short-term investments or those investments will be held for less than a year. Day trading is perhaps one of the better example of a short-term investment.
Short-term investing is all about true price. True price includes the buying price, fees, selling costs, and other costs. Short-term investments work on a profit setting goal. Usually the goal is 1-10% above true cost. The percentage is higher for smaller dollar amount investing and can be smaller if the investing amount is higher. Short term investing in gold should also consider the sport price.
Experts who invest in gold usually recommend using dollar cost averaging as an investment principle. Dollar cost averaging works by investing a fixed dollar amount in gold each month. Dollar cost averaging works by averaging out the cost of gold over the length of the investment period. Investors buy gold regardless of the price, and the average cost is adjusted with each purchase. This makes it easier to manage the gold investment. It helps the investor to know exactly when to sell. Dollar averaging cost works well because each purchase or investment of gold does not have to be tracked individually. This method of investing also helps to spread the risk of investing out over the entire gold portfolio. Instead of looking at each monthly purchase of gold as a separate transaction, dollar cost averaging looks at the entire group of individual investments as a single investment. This makes it much easier to manage.
To buy gold bullion requires a plan or investment strategy. Both strategies discussed here work off of understanding the spot value of gold. Use the formula to find the premium gold price will allow the investor to determine if this is a good time to buy gold bullion bars.