Investing in Gold or Silver

There is a continuous debate about whether gold and silver are a good investment. In difficult economic times precious metals tend to increase in popularity, and therefore in price, because they are more stable in the long term. After all, the value of your stocks might disappear overnight, but gold has been popular for thousands of years and it’s unlikely to go completely out of fashion.

Wise investment advice is based on the simple principle that you should not put all your money in one place. You might wish you had if the value increases dramatically, but you’ll be glad you didn’t if it crashes. Best to play safe and have a mixed portfolio, and there’s a place for including gold and silver in it.

The recent movement in gold prices tells an interesting story. In 2000 it was priced at just over $250 per troy ounce, having fallen from a peak of over $600 per ounce around 1980. However, the price has recently jumped as high as $1000 per ounce. So if you had bought gold at the start of this century you would now be sitting on a healthy profit. Silver has also increased substantially in value over that period.

This might make gold or silver sound attractive. But it is always a good idea to remember a basic principle of investment – the value of the commodity you invest it can go down as well as up. Successful investing is about timing, and sometimes you need to be prepared to wait a long time to see your investment come good.

If you are unfamiliar with buying gold or silver you will be surprised how easy it is. There is plenty of precious metal in jewelry stores but this is not the right way to buy it for investment purposes. Instead you will be looking to buy it in coin or bullion form. A quick search of the internet will show you that there a range of places where you can buy and sell.

There are two types of coin – the popular bullion or investment coins such as the Krugerrand, or historic collectors coins. The latter usually have a value beyond their weight in gold because they are historic artifacts – a 1933 gold Double Eagle, with a face value of $20, sold for over $7.5m in 2002.

Gold or silver bullion coins do not carry a face value, as their value is based on entirely on the amount of precious metal that they contain. They are available in varying sizes, based on fractions of a troy ounce. An alternative is to buy bars of gold or silver. There is no clear benefit to investing in either coins or bars – both give you ownership of precious metal and both can be sold in the future. Buying bars is slight cheaper than buying coins, particularly in larger quantities, but coins are generally a little easier to sell.

No one know which way gold prices will go in the future – there is a difference of opinion among experts. So before you plunge into buying gold or silver you need to do plenty of research for yourself, and decide what you are looking for in an investment. But in these uncertain economic times it might be a wise addition to your portfolio.