Buy gold now - is it wise?

Now that gold price is above $1,400 per Troy ounce, many people are divided in their opinions about the wisdom of buying gold now.

Some people are advocating the Buy Gold Now concept. They say that if you do not buy gold now, you will miss out the opportunity of a life time. They say that if you do not buy gold now, the gold price will keep on increasing, and you will not have a chance to buy it again.

Others are saying that the price is way too high. They say that you should buy it a few years ago when the gold price is still low.

They say that it is time for you to dig out all the gold earrings, and gold coins, and sell them away before the price drops.

So what is what? Buy gold now or sell gold now or buy later or do not buy at all?

The most important factor is your current financial situation.

If you have outstanding credit card debt, the most important thing is to pay off the credit card debt. Investing is for those with cash to spare, and do not need the money now.

If you foresee a large expenditure in the future, such as buying a new car, the coming wedding or the birth of a baby, you should not buy gold now. Nobody knows how gold price will perform in the near future, even though everyone agrees that gold price will increase in the long term.

Before we go into the matter of buy gold now or later or not at all, let us see the factors that account for the increase in gold price.

1. Governments

Governments keep gold. If you look into the central banks of the major powers in the world, you will see they have a large gold reserve.

The fact is that governments keep a large foreign reserve, gold reserve and oil reserve for the stability of the economy. It is hard to find a government that has no gold in its investment holding.

In times of crisis, governments and individuals hold on to the gold. That is why gold price rarely comes down in a crisis.

2. Fear

People fear the unknowns. The current Middle East crisis triggers the fear of the people worldwide. They do not know how long the Middle East crisis will last. They do not know if the supply of oil from Middle East will cease.

That is why they buy gold, and sell in the stock market. Gold is the commodity to relieve fear.

If you think the Middle East crisis will escalate, then buy gold now.

3. US dollar

Gold is quoted in US dollar. The declining value of US dollar means an increase in gold price.

When people find that a dollar is worth lesser and lesser with each passing day, they will buy gold to lock in the value.

Now let us talk about the different ways to buy gold.

1. Gold jewelries


If you want to lock in the value of your money in gold, never even buy gold jewelries.

Gold jewelries do not have high gold content. That means you are paying for the rental of the shop, the salary of the salespersons, the salary of the goldsmith, and many other metals except gold.

Gold jewelries look nice, but are practically useless as an investment tool.

2. Gold saving account.

Gold saving account allows you to invest in gold without holding the physical gold. Another advantage is that it allows you to buy gold into small quantity. For example, instead of paying $1,400 for one Troy ounce of gold bar, you can buy a few grams this month, and a few grams the following month.

You can use the dollar cost averaging method to build up a sizeable gold holding.

The problem with gold saving account is in the costs of maintaining the account. Some banks have higher cost of maintaining the account.

If you keep the account for a long time, you will find that the maintenance fee eats into the value of the investment.

It is best to find a gold saving account with low or no hidden fee.

3. Gold ETF

Gold ETF, Exchanged Traded Fund, allows you to buy and sell gold as if trading stocks.

Gold ETF allows short term speculating in gold price.

That means you can buy today and sell the next day. You need to pay the transactional fees.

4. Gold coins

Many people are familiar with gold coins.

They are likely to inherit the gold and silver coins from their ancestors.

The problem with gold coins is in determining the value of the gold coins. Gold coins are rarely investment grade. That means it is not .999 pure gold. You are more likely to find .916 grade.

Many gold coins are fetching a very high price, due to the design or the age or the rarity of the coins. These are the numismatic gold coins or commemorative gold coins.

The selling price depends on the interest of the collectors, not the actual gold content.

The Presidential Collections and other Presidential products are examples of commemorative gold coins.




5. Gold bars

The rich are the ones who buy gold bars, and keep in the safe.

They are likely to pass the gold bars to the children.

Buy gold now, as in the form of gold bars, for long term investment is advisable. While the price of gold goes up and down in history, the long term trend is upward trend.

That means you must prepare to lock in your money for the next few years.

Back to the question of Buy Gold Now - Is it Wise?

The answer is that anytime is the right time to buy gold, provided you can hold them and sell for a higher price.

The short term fluctuation in gold price matters if you are using Gold ETF method to trade gold. If you are investing for long term, buying gold coins and gold bars are better.

If you do not have so much money to invest in physical gold, open a gold saving account is the wise choice. It allows you to buy gold every month, and build up a sizeable gold holding as time passes.