Now that the mass media in the form of the Daily Telegraph’s share tipster Garry White are starting to show on their web-bite home pages tips on how to get into gold, one wonders if there is going to be a surge in demand for the inflation and currency collapse hedging metal.
We have also recently been bombarded with companies wanting you to stuff your gold in an envelope and get cash by return of post.
So, if big companies and the media are after it and talking about it, is it some action that the rest of us should want a piece of?
If exposure to gold is something that interests you there are several ways to invest in the precious metal.
You can buy the metal itself and store it yourself, but security may well be an issue for you.
You can buy actual metal but have it stored by a third party such as BullionVault in secure vaults, but be aware there will be storage costs. BullionVault are still offering a free gram of gold and a free ounce of silver at the time of writing.
You can by gold Exchange Traded Funds (ETFs). This allows investors to buy into gold in small more liquid amounts. But there are two types of ETFs, physical and virtual. With the former you have bought gold, with the latter you have bought paper that tracks the price of gold, but your money could be invested anywhere. It is important that you understand which type you have bought or are buying. Especially as there are reports circulating the internet that some ETFs may have over-sold the underlying gold by as much as 100 times. This means that if 100 people turned up at the vault and asked for physical delivery of the metal, 99 of them would go away empty handed. They would be offered cash instead but that is not why people buy into gold in the first place. So check the details of any trust fund involved in the ETF.
You can also buy shares in companies that deal with gold, especially the miners as gold production may well increase in the next couple of years. The telegraph report mentions three. Firstly, the traditional Rand Gold Resources, currently the only one in the FTSE 100. Secondly and a possible new entrant to the FTSE when the re-shuffle occurs later in the year, is African Barrick Gold about which little is known. And thirdly another possible is Petropavlovsck (formerly Peter Hambro Mining).
Gold is not seen as a growth investment in itself, but investing in it can help protect your wealth in bad economic times.
Also, do not forget silver. With a historical value ratio to gold of 15:1 some people say you should hold some silver as well as gold just in case you need to use it as actual money. Gold would be hard to use like this on a daily basis. But that’s a doomsday scenario.
The most important thing to do when investing in gold is to understand the type of investment it is.