Monday, March 27, 2023

When Should A UK Investor Invest in Gold?


As the price of gold fluctuates significantly, every second individual wonders-

“When is the right time to invest in gold?”

Multiple factors influence the price of gold. And of thumb, the price of gold rises when there is uncertainty and negativity in the equity or share market and falls when the growth is strong in those areas. However, it is not necessarily a fact, and as the market is volatile, there is nothing like a fact but research and predictions.

What Are Some Common Factors Affecting the Price of Gold?

Here are some things which raise the price of gold:

  • Consumption demand- Is the demand for gold higher?
  • Low-interest rates – gold prices are negatively correlated with an interest rate
  • Low supply
  • Geopolitical instability
  • Natural events- monsoons, pandemics, etc

When is the Right Time to Buy Gold? 

Gold prices rise sharply when an unpredictable event occurs. It increases the uncertainty over political and economic prospects in a country. It is because, in an unfortunate life event, the value of other investments falls drastically, and thus, in this case, investors find their haven in gold.

By doing this, they want to make sure that they hold something of value, and because of this, gold prices rise. Many investors are in a state of confusion when the market falls and thus turn to gold as an asset. And contrary to this, certainty and prosperity lead to a fall in the price of gold. Earlier gold prices used to dominate the situation of wars in a country.

What Are the Advantages and Disadvantages of Gold as an Investment?

Advantages of Investing in Gold

  • A fruitful investment in preserving for years
  • It is resilient to inflation
  • Act as an economic lifeboat when the stock market collapse
  • It can be held as jewellery
  • It is the single largest source of demand

Disadvantages of Investing in Gold

  • It is the most controversial investment for an investor.
  • Fear of an economic and inflation outbreak leading to unrealistic public demand
  • Change in sovereign wealth funds asset composition
  • Negative bond yields lose their appeal as an impactful hedge against equities.
  • Gold suffers, as it is not a portable asset instead of the physical asset. In this time, the lack of portability and sense of permanence is likely to be a significant source of comfort for the investor.
  • It doesn’t pay any yield.
  • Less way to diversify gold holdings compared to other investments

Is Investing in Gold Right for You?

If your primary goal is to grow money, investing in gold can prove fruitful for you, unlike other assets like property, shares, or bonds. 

You won’t be earning dividends from this investment, but you can surely keep it as an asset to liquidate later in an emergency if you don’t find suitable deals for taken payday loans on benefits in the UK

The risk profile of precious metals is low, and stock prices are volatile. So, if you sell out at the wrong time, you may lose the value, and thus, there is no point in keeping it as an asset for so long.

Thus, if you seek to leverage the benefits of your investment in the long run with increased value, then gold might be the right option. People used to hedge against short-term downturns and political uncertainty for this reason.

How can I Invest in Gold?

There are multiple ways to invest in gold. Some of which can be relatively accessible with a limited amount of cash. Here are some ways you can invest in gold in the UK:

1)     Physical Gold Bullion

Suppose you have money to invest in gold bullion, coins, or jewellery. Gold coins can be purchased from dealers and brokers. Therefore, it is essential to cross-check the authenticity of dealers and brokers before buying anything.

There are two main types of coins in the UK: Britannia and Sovereign. In addition, depending on the choice of coins to invest in, you may be exempt from capital tax.

Before signing the dotted line, consider the costs of storage and insurance.

2)     ETC (Exchange Traded Commodities)

ETCs are essentially a commodity akin to ETFs (Exchange-Traded Funds). You can trade on them by choosing the most reliable trading platform, and they are a cheaper alternative to buying physical gold. These act as stocks or shares. You don’t need to pay for storage and insurance but pay the fee for using the platform and trading.

ETC helps track the price of gold and helps you make critical decisions regarding investments.

3)     Trading through Royal Mint

The Royal Mint will help you get physical gold bullion, which you can either take and keep with yourself or store in the Mint’s storage facility, Vault. However, these charges have a potential fee. Using the Mint is a reliable way to buy gold. It will help you ensure that the gold is legitimate and properly stored. But another aspect of this is it can be more costly than other investment sources.

4)     Gold Bars

Investors usually consider large billion bars. It is mainly because of the scales of the economy. In the case of bars, metal content results in lower returns. Bars cost less, and most of these are missing high coins designs. However, there is a trade. Large bars are not as flexible to sell in this situation.

5)     Gold Coins

Although larger gold is an efficient way to buy gold, coins prove to be a better investment if you want to invest in gold, despite the slightly higher price premium in contrast to the bars. It isn’t very important when buying larger quantities.

Purchasing bullion as a gold coin gives one more flexibility compared to the bars. One of the most noticeable benefits of the gold coin is it exempts one from Capital Gains Tax (CGT). When it is time to sell off your gold, coins, and bars, both are worth according to the weight in gold.

If you’re investing in gold for the first time and don’t know which type to buy, you can consult a financial advisor. To advise you properly, they will analyze your preferences or life goals and suggest the right kind of investment for you. So, this article will help you invest in the correct type of gold at the right time.


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