A shiny metal, gold has maintained its status as a valuable for centuries. Kingdoms and empires have strived to maximize their ownership of gold. With the onset of societies, gold has been accepted as a form of payment the world over. Such is the might of gold that right up until the 1970’s, the American monetary system was based on a gold standard. Gold has been used to create an assortment of items. These range from bars, coins and jewelry to even being used in architecture thereby establishing an element of luxe. Apart from being visually appealing, gold doesn’t rust, corrode or decay.
However, unlike other commodities like oil, sugar and cotton, its chemical composition ensures that it continues to be in existence. It cannot be used up; it persists to exist regardless of how it presents itself. Commodities like oil and sugar, however, can be transformed into gas which can be used to fuel a ship. Sugar can be used in varied confections which can be eaten. Since gold cannot be broken down to suit this pattern of consumption completely, the demand and supply argument which holds for ordinary commodities, isn’t viable. This is because with time the supply of gold generated will continue to rise even if the demand for it dwindles.
In order to take advantage of the value of good, investors can either purchase gold bullion or invest in the shares of gold-mining companies. The former however, does not allow for potential recurrent generation of wealth which the latter does. Investing in gold bullion also requires funds to be set aside for its storage and insurance which can cut into its value and profitability. By investing in the shares of a gold mining company, shareholders have the potential to earn money from their dividends. As and when the price of gold increases, shareholders can increase their profit margins thereby boosting their earnings considerably. Shareholders however need to consider the political risks associated with such investments as some gold takes place in underdeveloped countries. Further production levels aren’t uniform and aren’t easy to maintain. Presently, India houses a modest number of gold mining companies.
Each time an individual invests in gold bullions they impact to its value. Whenever a currency fluctuates in its value, it also impacts the value and price of gold accordingly. Gold based mutual funds aren’t as expensive as gold bullion and are less susceptible to being affected by inflation.
Gold Exchange-Traded Fund (or ETFs) are lucrative opportunities for those looking for an alternative way to invest in gold. Available for a low cost, these ETFs invest in gold-backed assets rather than the metal itself. A form of commodity funds, they may be traded like stocks and allow for investors to own modest quantities of gold-related assets. Investors with limited funds available can expose themselves to this asset class with the aid of ETFs and diversify their existing portfolio.
Prior to investing in gold-based ETFs investors must consider liquidity-related risks and the price associated with trading such ETFs. Such digital gold investments can be traded like stocks in any brokerage or Demat account.
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