Ways to Invest in Gold and The Risks Involved

Goldbar The price of gold had reached a record today trading at $1000 an ounce for the first time. The value of the yellow metal increased by 27% during 2007 and rose 32% since the beginning of this year. Investors who already had invested in gold are getting big returns.

Gold is extremely sensitive to economic indicators. The fear of a recession in the US economy and the weak US dollar which had fall an all time low since 1995 against the Yen had pushed the price higher.

Gold is measured and sold in troy ounces. One troy ounce equals 31.1035 grams or 480 grains. One troy ounce is equal to 1.09711 avoirdupois ounce.

Since the price of gold is at an all time high, it does seem like its time to invest in gold. Many investment experts recommend waiting for the price to go down before you start buying. Cautions are also needed because the yellow metal is extremely sensitive to a number of economic factors.

Here are some reasons why you should be cautious:

All of these costs can erase your returns.

Ways to take advantage of the gold market.


There are ways to invest in gold without possessing the actual gold.

Here are the ways:
Invest in gold mining companies: The stocks of some of these mining companies had been riding on the momentum and in some cases, the value is higher then the gold itself.

Two gold stocks in particular had been trading heavily and moving higher today (March 13, 2008) on the New York Stock Exchange:

Gold Related Exchanged Traded Fund (ETF): ETF is a basket of
stocks that can be traded just like regular stocks. ETF provides a convenient way of investing in gold without the hassle of picking different stocks to own. One downside to gold related ETF is that, just like the actual gold, IRS considered it as collectibles and are taxed at the same rate as gold bars. Your capital gains obtained from ETF are taxed at almost twice the rate of other equality investments such as stocks.

Risk Involved: Whether you buy individual stocks or ETF, you need to keep in mind that the price of gold will not stay high forever. Like they say, “Whatever goes up must come down.” Once the US economy goes back up, the US dollar regains its higher value and the price of crude oil goes back down, the price of gold will most likely go down along with it. Therefore, jumping into gold related stocks or ETF now is risky, especially when it is at an all time high. Like all investments, you should do your research and consider all of the facts before buying. Many financial advisers think you should put a small portion of your portfolio into gold related investments.

The link below might be of interest to you:
Value of gold investment update

March 13, 2008 | Filed Under Investment, Tax 

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