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Things to remember before buying gold, silver

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It is really important for an investor to first understand the economy and the financial systems prevalent in the market before he decides what to invest in.

Should an investor buy more gold or silver?
One of the main reasons investors prefer investing in these two metals is the stability witnessed in the market. Liquefaction is also an easy process for gold or silver bars and coins. Do note that purity of the mineral is of utmost priority and should be given its due importance.

Another important factor governing the decision on whether to invest in gold or silver is the price. Though the variation in the price of gold or silver is not as unpredictable as that of shares and equities, there still is a noticeable difference on a daily basis. However, when you are investing a large sum of money then this small difference can make a lot of difference. Hence, one should study the market carefully and invest when the price is relatively low.

Choosing the right vendor is also very important. If carefully observed then the price variations with wholesalers, retailers and commercial banks can be clearly noted. In this manner one can watch out for the purest gold available at a comparatively low price. For a regular investor, it makes sense to invest at regular intervals. This way one can take advantage of the market volatility. Investing in both gold and silver makes sense for a regular investor as he can diversify and can have a steady return irrespective of market fluctuations.

Different forms of investing in gold and silver
Other than dealing with shares and certificates, there are a number of ways in which one can invest in gold or silver. A few have been listed here:

Bar: One of the most traditional ways, dealing with bars is very simple too.
Coins: This sort of investment depends on the weight of the gold or silver coins.
Accounts: Swiss banks provide a gold-account option which aids in transactions involving the precious metal.
Gold exchange trade funds: This method helps gold transactions through the stock exchange.
Spread betting: This involves predicting the rise and fall in the price of gold or silver before investing in it.
Investing with mining companies: This is just like investing in the stock exchange. The only difference is that here one deals with shares from mining companies.

When is the right time to sell gold or silver?
In the financial slump after 2008, people were selling their gold and silver as a means to make some extra cash. With the price of the two precious metals having reached an all-time high, it was wise to hold on to the metals and see how far the prices soar, and then cash in at the opportune moment. This move could be worthwhile, especially if you plan to pay a big chunk of down payment for a home loan or perhaps help you buy a car without having to opt for a loan.

There are two factors that govern the decision of the timing of a transaction involving gold or silver, the value of the US dollar at that moment and the investor’s financial situation. Usually, the price of gold is inversely proportional to that of the US dollar. However, most investors don’t have pure gold lying around in large quantities. So unless you are investing or speculating on a really large amount of gold or silver, the drop in the US dollar’s value will not matter.

Disclaimer: All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.

Story first published on: January 07, 2013 17:11 (IST)

Tags: gold, silver, gold coin, gold bar, gold ETF

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