When I started serious gold investing back in 2000, gold had recently hit its low of $252.80 on 20th July 1999. At that time the range of of gold investments was severely limited to a small number of funds and to a far smaller number of gold equities. They were all performing very poorly and to purchase gold at that time was the ultimate contrarian investment.
My bank, which had been running a precious metals fund for more than 10 years, decided to close it in 2001, forcing me to relocate my funds. I'm sure you won't be surprised to hear, that in the normal far-sighted approach banks seem to display, many funds were closed at or near the bottom of the market, or even when the market had begun to show signs of rising. That same bank waited until 2008 to reopen its gold and precious metals fund.
Of course Gordon Brown, the UK Chancellor at that time, also became rather notorious for his sale of 400 tons of the UK Gold reserves at the magnificent average price of $272 an ounce. Gold has risen by 400 percent since 2000, representing a loss to the UK in excess of $8 billion dollars, money the UK can ill-afford to lose right now.
Since those far off days of bottoming-out gold markets, the range of investment vehicles for gold, both virtual and bullion, has expanded very significantly. Gold has become close to being a main-stream investment and the choices we have which cater for a wide range of risk levels is nothing short of impressive.
The choice of gold related investments continues to expand. The amount of gearing determines the
risk levels.
1. Gold Coins and Bullion are the traditional way of investing in gold and silver. Bullion coins are legal tender and free of capital gains tax. There are now a number of reliable storage facilities which guarantee security and which enable you to trade your gold holdings. GoldMoney and the Perth Mint are both excellent examples of ways to hold and trade gold and other precious metals without having to take delivery. Bullion will track the price of the metal, making it the least volatile way of holding gold. Rare gold coins can on the other hand be very volatile.
2. Gold Bullion Funds - This is a way of holding the 'virtual' metal by holding the shares of the trust. Each share is secured by gold bullion holdings which theoretically can be delivered in lieu of the shares. SPDR Gold Trust is the largest of these and has been the focus of significant buying activity by George Soros recently. And where George Soros is seen to go, many follow!
3. Gold Mutual Funds - If you prefer some gearing to your investment choices, Gold mutual funds are one of the safer ways to invest in gold stocks.There are now a wide range of gold funds, Blackrock Gold and General being one example. It has performed fantastically well since its launch in 1988 (note, near the bottom of the market) at 1 pound sterling per unit. It now stands around 11.50 sterling and has been as high as 13.50 sterling.
4. Exchange Traded Funds (ETFs) are securities trading on the stock exchange generally tracking the underlying index. One of the most popular is Market Vectors ETF (GDX) representing the BIG Gold companies, was launched in 2006 at $37 and has been as high as $55 and as low as $15. It now stands at around $44
5. Higher risk ETFs - Market Vectors Juniors (GDXJ) tends to be a notch higher in risk level. It was launched very recently in November 2009 at $26, and has already demonstrated swings of almost 20% in both directions. GDXJ represents a basket of fairly high risk equities on the Canadian Market which is reflected in its volatility.
6. Individual Equities - Unlike Gold Bullion which is regarded as a safe haven asset, unhedged gold shares are regarded as risky and can be extremely volatile. There are hundreds of listed companies out there claiming to be gold exploration concerns. The majority will never produce a dime. Good research or professional advice is recommended.
7. Futures and Options - And at the top end of the gearing and risk scale are gold and silver futures, or options on gold and silver futures. This is a highly specialized area which can win or lose fortunes.
Anna P. Best was based in S.E Asia for many years where she developed her interest in precious metals. Until recently Gold has not been an area the average investor would consider, but that has changed and suddenly gold is mainstream, and there are so many opportunities out there to profit from gold and silver. Anna enjoys sharing her knowledge with other enthusiasts. She has prepared a complimentary report packed with facts which you can download at Gold Report.
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