Wednesday, 24 July 2013

Bullion is the Best Way to Invest in Gold: Here's Why

A lot of people have come to realize that investing in Gold or other precious metals can be a great way to protect their assets and wealth. Still, even if one decides that they want to invest in Gold, they are often confronted with the question of “how” to invest. With precious metals there are numerous options, including bullion, futures, stocks in Gold mining companies, and funds in Gold mining companies. In this article we will explain why bullion is the best option for most investors. Let's start by outlining some of the distinct differences between the four previously mentioned ways of investing Gold (or other precious metals).

Bullion is probably the most straightforward type of investment. When you purchase bullion, you purchase coins or bars of a specific carat of Gold. Most bullion coins are pure Gold and all high quality forms of bullion are weighed out to a very exact amount. You should not underestimate the time and care that is taken to ensure that the coin features both an exact weight and exact carat. The biggest risk with Gold bullion may be storing and securing your investment. Still with all of the advanced safes and security measures now available, this should not deter you.
Futures are a bit more difficult to explain, but in essence a futures contract is a contract that ties two parties to buy and sell something at agreed upon prices at a future date in time. So, if you think Gold prices are going to rise from USD 1,300 today to USD 1,800 within a year, you can buy a futures contract to guarantee the sales price in today's prices. Then, if Gold prices rise, the value of your futures will also rise. Usually you will then sell your futures contract to another investor. Once the end date comes due, the Gold will need to be delivered to whoever owns the futures contract. Does this sound complicated? In many ways it is, and this is one reason why many investors shy away from futures contracts.
Investments in stocks and funds means that you invest in a financial instrument that is tied to the mining of Gold. For example, you might buy stocks in Barrick Gold, the largest publicly traded Gold company in the world. The basic theory behind investing in such companies is that if Gold prices go up, stock prices in Gold mining companies should also go up. Why? If Gold mining companies are able to sell Gold at a higher price, their revenues and profits will increase. Gold mining funds are portfolios made up of the stocks of numerous Gold mining companies rolled up into one package. In general, funds help hedge risk against the failure of any one company.
We will be blunt, if you are looking to make investments based on the actual value of Gold, you should quickly strike stocks and funds off of your list. There are simply too many factors involved in stock investing that could derail your investment even if Gold prices go up. For example, you might decide to invest in Barrick Gold and suddenly Gold prices start to rise dramatically, pushing Barrick's stock prices up. At first your portfolio looks great but then news breaks that a major accounting scandal has been uncovered at Barrick Gold. Suddenly, the company's stocks are tanking, even as Gold prices continue to rise. In this situation, you correctly predicted that Gold prices would rise but lost money anyways.
And besides scandals, numerous other things could have a severe impact on Gold stock mining prices, even as Gold values continue to go up. Consider this, a civil war might break out in a nation with rich Gold deposits and it turns out that the companies you have invested in obtain most of their Gold from this nation. Suddenly, their mining operations have been disrupted. Now Gold prices are rising because supply is decreasing, but your stocks are plummeting because the company you invested in just lost its mines to an armed rebel force. There are also many more other circumstances that can affect Gold mining stock prices, even if Gold prices are going up. Bad management, a workplace accident, and numerous other things could devalue your stocks.
Futures might be a good investment for some people in certain situations. If you are afraid that you will not be able to properly secure your investments, for example, futures may be a good investment. Still, futures undermine one of the most important aspects of investing in Gold. As the last few years have proven, financial markets are extremely risky and there is a genuine risk that a financial crisis could emerge that could literally wipe out financial markets. If this happens, there is a huge risk that you will lose most, if not all, of your investment in futures. One of the most important reasons investors invest in Gold is to protect against disruptions in financial markets. Investing in futures ties you to these very same financial markets that Gold investors are trying to diversify away from.
This leaves Gold bullion as the best possible Gold investment. With Bullion you will have physical precious metals that will stay in your possession even if world financial markets tank. Further, you will not be vulnerable to the individual circumstances, such as scandals, that can quickly overwhelm individual companies. Instead, you will be tied to the swings in general market prices.
As a side note, the same arguments outlined above apply to Silver, Platinum, and other precious metal investments. So if you are considering an investment in precious metals, bullion should be at the top of your list!

Wednesday, 10 July 2013

Silver Bullion as an Investment Opportunity

Besides Gold, no other metal has been as important of a bullion metal as Silver. Well regarded for its shine and chemical properties, Silver makes a great investment for precious metal investors looking to diversify their holdings. Silver has also enjoyed a long history and there is no reason to doubt its future as a major bullion metal. As you will find out, Silver is an especially attractive bullion coin due to its long history and its numerous use values.
Silver enjoys many important physical properties. It has a melting point of 1763.2 degrees Fahrenheit, making it stable under most conditions, but also easy to melt with the proper equipment. Silver has one of the highest rates of thermal conductivity, and also optical reflectivity. In fact, silver is a preferred material for premium mirrors. Silver was also instrumental in the development of early photographic techniques.
Silver has a long history of being used in a variety of applications, from minting coins to being molded into “silverware.” On one hand Silver is quite malleable and easy to work with. On the other hand it is a bit more sturdy than Gold, making it a better metal for certain applications. Silver does not tarnish easily, however, certain molecules, such as Ozone, can cause it to tarnish. It's important to keep this in mind when storing Silver as bullion.
Silver is also far more abundant than Gold or Platinum, but is in high demand for use in industrial applications and for making jewelry and other fine goods. This means that prices will likely remain stable and increase as time goes on, especially as people buy more electronics that use Silver.  Silver oxide is also used in batteries for small electronic devices, such as watches, because the material holds a charge for a very long time. Silver is also used for creating high quality musical instruments, medicine, and a wide range of other applications.
Further, precious metals, such as silver, are frequently used in jewelry and other luxury items. This is important, because the world's population is slowly growing wealthier, creating increasing amounts of discretionary income that can be spent on expensive luxuries, like jewelry. So as countries continue to emerge and populations find themselves with greater amounts of discretionary income, expect spending on jewelry to rise. And for an investor holding onto Silver bullion, that increase in price will result in big returns.
Mentioning all of these uses is important, because they create demand for Silver. And demand, in turn, will stabilize and raise the price for the metal. All investments are determined by market forces and when demand outstrips supply, prices tend to trend upwards. The high demand for Silver makes it a safe and stable investment, and can help hedge against declines in Gold or other precious metals. Remember, a basic rule of investing is to diversify your portfolio!
Silver also has a long and illustrious history. Silver was used by the Roman Empire to mint coins thousands of years ago, so its history as a bullion coin is well-established. Further, when the New World was “discovered” the Spanish quickly found that Silver was in exceptional abundance. The Spanish mined Silver literally by the boatload, and this abundance of wealth help shaped the course of history.
Now, it is believed that most of the world's Silver mines have been discovered. Yes, most likely more mines will be found, but the Silver “bonanza” has likely come to an end. In fact, analysts now believe that there are only 1 billion ounces of unmined silver left in the world, compared to 11 billion just a hundred years ago. This means that the increase in supply will slow, while demand will only continue to rise. And that means that prices should rise in the long run!
This long history has made Silver a very common bullion metal, and is arguably the easiest type of bullion to find besides Gold; plus it is affordable. Right now you can purchase 1 oz 2012 Silver Mexican Libertad Coins from for only  $38.53 NZD. If you are looking for the always popular American Eagle silver coins, you can pick one up for only $39.03 NZD, which is actually less than current prices being offered by the U.S. Mint!
Silver bullion definitely warrants a close consideration by any serious investor and can help hedge against declines in the stock market, real estate investments, or a declining national currency. If you are interested in precious metals (and you should be), you should consider building a diverse portfolio that includes Gold, Silver, and Platinum. This way, you will spread out your risk and maximize your profit potential. If one metal suffers a decline, there's a good chance that growth in your other metals will offset any losses. Right now, precious metals are selling quite cheap in the face of a slowing global economy, so they are becoming an even more valuable investment.