Monday, March 2, 2009

How to Invest in Gold

Investment in gold is used as a hedging strategy against market fluctuations, inflation and economic or political turmoil. Throughout history, whenever there have been times when economy was weak or the economic markets were affected due to political situations like war, people relied on gold as an asset in lieu of normal currency.

Bullion gold coins are a good way to start investing in gold. Government issues bullion gold coins in troy ounces and they range in weight from 1/20, 1/10, 1/4, 1/2, 1 ounce and even 1000 gms. Gold coins should not be confused with collector item coins which are valued based on their rarity and factors such as date of issue. The idea behind buying Bullion gold coins is to hedge against fluctuations in stock and currency markets when gold value tends to increase or remain stable.

Another good option is to buy Exchange Traded Funds (ETFs) which are backed by real physical gold. Futures and Options in gold are highly speculative markets and are best avoided due to large range fluctuations due to betting.

There are certain financial institutions and banks which offer Gold accumulation plans. All you need is to allocate a small some of money into the Gold Accumulation Plan (GAP) which is then converted directly into physical gold. You can either take delivery of gold or get the money back upon completion of the term. If the gold price increases during this time, you would be in profit. GAP allows you to invest small amounts regularly and still insure that you are able to diversify your investment into gold without actually buying a tonne of gold at once.

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