Gold Bullion for Diversification

Eagle with Gold Bullion

The concept of investing in gold is like you are hiding assets in an offshore account.  Your purchase of gold bullion is a great way to diversify.  Gold Bullion has been around for years.  It is because it’s a natural resource that is abundant, but is difficult to extract.  Gold has been in demand as a valuable money asset since it was discovered, was revered by pirates, as we well know, and is still considered a valuable addition to a diversified portfolio. 

You can touch it and hold it with both coins and the gold bars. You can’t really hold a share of stock, however. Ancient civilizations traded in gold because it could be  easily turned into coins or jewelery.

Ways to Buy Gold Bullion

  • Physical gold – People can buy bullion, gold coins, jewelry, or even gold bullion bars.  The bars you have to keep in a safe place.  You can put them in a deposit box, but most people do not let the bars out of their control.  They are usually stored in a safe deposit box in their home, some people bury them in the back yard, and others deposit in insured safe deposit boxes, such as the ones in Zurich or Singapore, but usually not in a bank.  I won’t go into detail about the different kinds of coins and will reserve that for another article.
  •  Gold ETF’s – If you do not want to deal with trying to store a physical product, then ETF’s might be the answer.  Each share of the ETF reqpresents 1/10 of an ounce of go.
  • Gold Certificates – This is another way to buy gold without having to worry about storage.  Instead of physical gold, you get certificates representing your ownership of a certain amount of gold.  So you don’t have storage, but you have to go through a dealer to purchase them.  Most people opt for ETF’s instead of the certificates.  Easier to purchase.
  • Gold Mining Stock – With this method you invest in companies that mine the gold.  There is more potential for growth than with physical gold.  But this method has the inherent risks associated with the stock market.  
  • Stock from Royalty and Streaming Companies – These are companies within the mining industry that invest in mining exploration projects.  They receive royalties from the projects.  But again, this is another stock and is subject to the same risks as the stock market.  

How to Buy Physical Gold Bullion.

One of the most popular ways of buying gold bullion is in bars or coins.  You need to do research on how you are going to do this, and how much you want to buy.  You can still watch the TV shows about the guys in Alaska and other places still panning for gold.  Not a good return on the time you put into it, other than being out in the outdoors enjoying nature.

Look at gold bullion as more of part of diversification of your portfolio.  It should be long term to protect against downturns in the stock market.  

Gold never depreciates.  It will always be what it is.  A piece of metal…valuable metal, however.   Because of its inherent retention of value, that it is a good addition to your well rounded portfolio.

Other countries in the world base their currency valuation in comparison to the dollar.  Like pounds to the dollar or Euro to the dollar.  You get the picture.  Now imagine a scenario where the dollar would crash.  In that case, you need the money of the country you would want to escape to.  OR, you could have part of your portfolio in gold.  If you found a stable government, you could go there and exchange the gold for local currency.  The Federal Reserve Notes would be worthless at that point.

I know it is a hypothetical that hopefully will never happen, but it is just illustrative of the power of gold to round out your portfolio.  

How to Buy Gold Bullion and Coins?

Here are three steps to buy so you won’t get burned:

  1. Know the spot price – You can go to goldprice.org to find that.  
  2. Understand the spot price in troy ounces, and for .999 fine gold.  That is not the same as regular ounces.  It is known as avoirdupois system of weights.  An example is the riddle, “which is heavier.  A pound of feathers or a pound of gold.  The answer is feathers because a pound of gold is 12 oz., instead of 16.
  3. Buy from a place that will only put a premium of 5% on the gold with free shipping and insurance. 

Do your homework on places to buy gold.  There are scams out there and know the company you are dealing with.  The main scams are not delivering the gold, and the gold is fake.  You can prevent being scammed by doing your homework and picking a reputable company that has the three steps mentioned above.

The price of gold is volatile, and can change very quickly, so be aware that investing in gold always has a potential for loss.  You should only form a small part of your portfolio (some recommend between 3%-5%, up to 10% if you’re happy to take on more risk).   Gold doesn’t produce any returns, so if you want to be earning dividends from your investment, stock might be a better option for you.  

With any investment, you should do as much studying or enlist the assistance of a reputable financial advisor before you invest.

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