Pros And Cons Of Investing In Gold

There are a variety of investment opportunities available today based on a person’s long term and short term financial goals. One of the areas that a person can invest in is rare metals, like gold. However, before investing in gold, it is best to first check out the pros and cons of this kind of investment.

One thing is for sure that over the last three decades, gold price has surged. In the year 1970, one troy ounce of gold was $37 and today it is over a thousand dollars. However, the increase in the price of gold has not been steady. Some years the price was high and in others it was lower than the previous year. A good example is the price in the years 1980 and 1985. The price of gold in the year 1980 was $590 for a troy ounce, and then in the year 1985, the price decreased to $327. While the price has been fluctuating, on the whole the value of rare metals has been increasing. Compared to all the previous years, 2011 has the highest price. Hence, for many people, this could be the right time to invest in gold bars, bullion, ETFs, gold certificates, gold accounts and derivatives. However, knowing the pros and cons of gold investment can help you decide whether it is the right kind of investment for you.

Pros:

Gold invest provides easy liquidity when compared to other types of investment vehicles. You can buy or sell gold through banks or jewelry outlets any time you want.

While the price of gold has been fluctuating, this is a rare metal and there is limited supply of it. Hence, the price will not fall. In fact, it will keep rising. When there is recession, a lot of people tend to invest in gold and this causes the price of gold to increase. If you want to hedge against inflation, then gold investment is the best option.

You can make a tidy profit when you sell the gold that you have invested in as the price of gold will keep rising.

Cons:

Unfortunately, the biggest disadvantage of gold investment is its speculative nature. Hence, it is next to impossible to predict the value of gold in the future. The gold market is heavily dependent not only on the demand and supply, but also on the expectations of investors.

Investing in gold does not give a person tangible returns or dividends. Also, the person’s investment gets frozen when monies are invested in gold.

There can be a problem of storage when it comes to gold bars and bullion. This will cause the person to incur additional expenses. On the other hand, ETFs and gold certificates do not require a person to have physical storage space.

You should make your decision to invest in gold after weighing the advantages and disadvantages. This will allow you to make an informed decision that will help you meet your financial goals.

Source by Kum Martin

Pros And Cons Of Investing In Gold