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How to Invest in Gold?

How to invest in gold? Different forms of investing in gold and their pros and cons Demand for gold investments soared during the financial crisis 85.6 82.4 61.7 38.9 I Investment demand, in billion US$ 35.1 32.5 15.3 12.4 8.5 6.2 3.5* 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 * Only retail investment through bars and coins The price of 1 ounce of gold more than quadrupled over the last ten years 1,620 1,776 1,658 1,632 1.406 US$ per troy ounce (Q1, Q2, Q3, Q4) 1,663 1,326 1,276 1,088 599 1.506 930 1,439 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Private investors can choose between different ways of investing in gold Below we describe the most common forms of investing in gold and compare their specific advantages and disadvantages. Forms of gold investments Bullion bars Bullion coins in gold Gold securities GOLD BOND Numismatic or collector coins Vaulted gold GOLD BULLION Demand for bars and coins 76.6 75.1 67.4 Gold bullion stands for gold bars and gold bullion coins. Both, bullion bars and bullion coins, are used as investment objects. 47.2 Bars & coins, in billion US$ 23.6 21.3 9.5 7.2 3.5 4.5 5.5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Bullion bars The London Bullion Market As- sociation defines quality standards for gold bars and lists refineries that meet those standards. Bullion bars typically have a purity of at least 99.5%. + Prices of larger gold bars are usually very close to the market value of the gold they contain Investors have to care for secure storage The smaller the bar the higher the mark-up Bullion coins est in gold invesi in gola Bullion coins are contemporary precious metal coins minted by official agencies for investment purposes. + Prices of bullion coins are quite close to the market value of the gold they contain The smaller the coin the higher the mark-up + Bullion coins are often used as legal tender and have a face value in a national currency Mark-ups for bullion coins are generally higher than mark-ups for bullion bars Numismatic or collector coins Hoo Numismatic or collector coins are coins which have a collector's value beyond the value of the gold they contain. + Potentially higher value than value of gold content due to rarity Price is substantially driven by other criteria than the market price for gold | High risk of unfair prices or even fraud The market for collector coins can be much less liquid than for other gold investments - Alternative investment like art that requires special expertise VAULTED GOLD Holdings of vaulted gold stored with BullionVault and GoldMoney 2,887 2,562 Million US$ 2,287 1,669 1,166 496 319 177 92 11 41 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Vaulted gold denotes gold bullion, which is stored in professional vaults. Investors have outright ownership in the gold which is stored on their behalf. + Outright ownership of gold Provider of vaulted gold has to be reliable Vaulted gold is often cost-efficient due to use of large standard bars Delivery option but no immediate access to gold holdings + Securely stored in professional vaults Investors can easily buy and sell vaulted gold GOLD SECURITIES 2800 Gold securities are financial instruments whose value 2400 depends on the movement of the gold price. 2000 1600 Some gold securities are at least partially backed by physical gold, others are not backed. 1200 800 400 Gold invested in ETF and other securities, in tonnes 2004 2006 2008 2010 2012 2014 GOLD BOND Gold ETFS Gold ETFS are exchange traded funds which hold gold. + Gold ETFS are cost-efficient - Investors have no outright ownership of gold holdings but interests in a pool of assets + Easily tradable through brokers and exchanges Annual expenses reduce the gold holdings - In many European countries Gold ETFS are not eligible for public distribution. Gold ETCS Gold ETCS are exchange traded commodities. A Gold ETC is a financial instrument issued against a direct investment by the issuer in commodities or commodity derivative contracts. The price of a Gold ETC is linked to the performance of gold or a gold derivative. + Gold ETCS are cost-efficient Investors have a claim against the issuer but no outright gold ownership + Easily tradable through brokers and exchanges Some Gold ETCS are not even backed by physical gold Derivatives and structured products based on gold Derivatives and structured products on gold give investors exposure to various developments of the gold price. With such products investors can, e.g., bet on increasing or decreasing gold prices or other price developments. Derivatives and structured products enable investors to speculate on all kinds of gold price movements No gold ownership Counterparty risk Depending on product characteristics potentially very high price risks GOLD MINING STOCKS Top 10 Gold Mining Companies by market capitalisation 2012 Newcrest Mining Yamana Gold 11.6 Polyus Gold 17.5 9.8 Newmont Mining Eldorado Gold 9.6 19.7 AngloGold Ashanti 9.5 9.1 Kinross Gold Freeport-McMoRan 23,1 28.7 Barrick Gold 26.4 Goldcorp Market Cap billion US$ Gold Bugs Index of gold mining companies 2001 2005 2010 STOCK CERTIFICATE 252365 akrvepan pamal onerlna mpng Mining company stocks give investors an equity shareholding in a mining company. Leveraged participation in gold price development (positive or negative) No outright gold ownership but a shareholding in a mining company Higher risk (positive or negative) than in case of gold holding Performance depends on individual company's management, reserves, etc., not just gold price Sources: Wikipedia, World Gold Council, London Bullion Market Association, Thomson Reuters GFMS, TRUSTABLE BullionVault, GoldMoney, - The Wayback Machine, NYES ARCA Gold Bugs Index, Yahoo Financel, Trustable Gold compare gold investments 531 1,415

How to Invest in Gold?

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This infographic shows different forms of investing in gold and their pros and cons.






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