- This is a safe haven asset that retains or grows in value in times of trouble
- There are several different ways of investing in gold, with varying risk and reward levels
- Gold prices have risen in the last 2 years, with more growth predicted for 2020
The idea of investing in commodities might sound rather daunting. Perhaps you think that you would need to be an expert to do this well. This isn’t true, as anyone can invest in the likes oil, gas, corn and copper.
Gold has traditionally been the most widely-chosen commodity among investors. Let’s take a look at why this precious metal could be your secret to a great investment this year.
Why Gold Is the Most Popular Commodity
This is a diverse market, as gold is used all over the world and for a variety of reasons. As well as being used in jewellery, it is also vital in different types of technology. In addition, numerous central banks keep a store of this metal as a reserve asset.
You will see gold referred to as a safe haven. It has a high degree of liquidity and can be used in times of crisis when fiat money may lose some of its value. Gold also tends to gain value as inflation rises or political uncertainty grows.
There is very little risk involved in buying gold. If you look at the price trends over the last 30 years, you will see that the trend is almost always steadily upwards. It is also easy to purchase gold and even small investments can be made.
In the last couple of years, the price of gold has risen fantastically. This is a good point to look at the different ways of investing in this precious metal.
Different Ways of Investing
You don’t need to go out a buy a pile of gold bars to invest in this way. There are a few different ways of investing in gold.
- Buy bullion. Physical gold is known as bullion and can come in bars or special coins not designed for use as everyday currency. You might want to keep it in a home safe or in a deposit box at your local bank. Some vendors will also give you the option of storing your gold remotely with them.
- Invest in futures contracts. This gives you the chance to earn bigger profits, as you aren’t physically buying the gold. Instead, you are betting on whether the price will rise or fall. This is a riskier approach than buying bullion, and you need to understand the market.
- Invest in shares of mining companies. Another option is to buy shares of a company that mine gold. This gives you the chance to claim big profits if they increase production or if the price of gold rises significantly. On the other hand, you will be running the usual risks that are involved in any stock market investment.
- Buy into an exchange traded fund. This is also a popular way of buying into gold. In this case, you get a cheaper way of investing in gold than buying it directly, as you can buy a share of the ETF for a small amount. The main gold ETFs have been performing well in the last year or so, as more people give them a try.
What the Future Holds in Store
This is the most important point of all. As we have seen, gold is traditionally seen as being a safe and steady type of investment. It has had a strong start to 2020, reaching a 7-year high of $1,611 before dropping back down to around $1,550.
This spike was probably due to the problems seen in the Middle East. Its reputation as a safe haven means that gold is typically more sought after in times of trouble, when fiat currencies can be extremely volatile.
As with any investment, no one can say for sure what price it will hit in the second half of 2020. However, most industry experts think that this timeless investment will perform well. This prediction suggests that it will reach $1,650, while others predict bigger gains over the rest of the year.
Gold is often viewed as a safe and steady type of investment, but it can also bring big returns in the right economic conditions. A lot of people think that 2020 could be perfect for gold to keep on climbing in value.