Investing in Gold the Right Way
The main incentive of an investment in gold is preserving purchasing power and value, as it does not yield any returns. Gold is considered a safe investment, but, of course, it can also fluctuate. If you want to invest in gold and other precious metals as well as technology metals, you should consider the following points.
1. Producers’ & Sellers’ Reliability
Trading in gold is not subject to the Financial Market Authority, which is why it is important to look into your gold suppliers (trading, mining, refining etc) beforehand. An important factor for this is the LBMA accreditation.
LBMA (London Bullion Market Association) is an independent authority responsible for worldwide gold trading outside the stock market. They ensure the quality of all LBMA-certified companies by frequently carrying out inspections. Criteria for these inspections are strict and include, for example, purity, weight and responsible sourcing.
Inspections should not be conducted by the sellers themselves, but by external parties like auditors, banks or insurance companies. These inspections are necessary to ensure that the gold resources the company states to have exist and therefore that investors’ private funds are used according to contract.
When investing in gold, make sure you are purchasing gold as a physical object. This should also entail the possibility to have your gold resources or parts of them delivered to you, which confirms that it does not only belong to you on paper. If you only had a claim on the gold under the law of obligation, and having the gold delivered to you was not an option, you could be in for an unpleasant surprise. For example, when your seller goes bankrupt, and you cannot get a hold of the gold you purchased.
2. The Larger the Amount, the Better the Price
The larger the quantity of gold you purchase, the better the price you get. The smaller the amount you buy, the higher the percentage surcharged on it. However, only a few people have enough savings to buy one kilo of gold straight away. If you purchase gold via dealers that buy in large quantities, you can benefit from less surcharges and therefore a better price.
3. Rule Number One: Diversification
This applies to financial investments in general and to the area of gold, precious metals and technology metals as well. In addition to “classics”, like gold and silver, you can also choose to invest in white metals, like platinum and palladium, technology metals or diamonds.
4. Taxes and Total Costs
One should always aim for reducing costs where possible. The most important factor for this: taxes.
The purchase of gold with a high level of purity is tax-free. You can avoid paying VAT for other metals, like silver, if you store them in a duty-free warehouse after purchase. It is also possible to have silver delivered to your home and only pay a reduced tax rate. The amount of tax you need to pay always depends on the respective seller and tax legislations.
After owning it for a period of one year and one day, selling gold or other precious metals is tax-free. If you invest in non-physical forms of gold, however, your investment is subject to Capital Gains Tax.
5. The Right Storage
Diversification equals security. This also applies to the storage of gold. You should pay attention to the following points:
- The gold is stored for you by your seller in a high-security vault with corresponding insurance cover.
- It is possible to have gold delivered to your home (e.g. ounce, 50g, 100g), where you can store it yourself. A safe vault or a good hiding place is essential, as is good insurance.
Banks also offer vaults and safe deposit boxes for storing gold. Bear in mind, however, that in case of bankruptcy it might become difficult to access your gold.
Every option has its advantages and drawbacks, which is why it is important to diversify in the way you store your gold. You can have a smaller amount of gold stored at home, preferably an amount that is easy to sell, should you ever need more liquidity.
