Risks In Buying Gold

by Junior Boomer on March 16, 2011

Gold certainly has a very powerful history and since its discovery the metal has been symbolized as a means of wealth and power. Throughout history nations have obsessed over gold, killed for it and held power because of it. The question that you often hear today is: Is gold a good purchasing investment or are the risks simply too high and not worth it? Here is a look at why people like to invest in gold along with what you need to consider and watch out for if you do decide to invest in it.

Why People Buy Gold

Many people purchase gold because they think that it is a wise and safe investment that will withstand the test of time. They think that purchasing gold is safer than other investments like stocks and bonds and that it will withstand economic hardships and recessions better than other investment options. What these individuals do not realize is that the value of gold can fluctuate and it has not proven to rise in value like other investments over the last several decades.

Things To Consider Before Making a Gold Purchase

There are numerous things to consider before purchasing gold. To begin with you need to look at the cost of the gold and whether the price tag accurately reflects the price of physical gold. You will need to decide what form you will purchase the gold in. Gold is sold in the form of coins and bars or you can purchase an allocated gold account. Coins and bars each have different values and liquidation of bars tends to be more difficult.
Additionally, you will need to arrange transportation if you plan to possess the gold and security arrangements whether you possess the gold or have it in an allocated gold account.

Risks You Need To Be Aware Of

Purchasing gold does come with a number of risks.

  • When you purchase gold, in order to know the content is real there are added costs to have it tested and if it is not real, you risk losing your investment.
  • When you hold your own gold you have the risk of loss and theft and because of these risks you will need to find a secure storage location for holding your gold.
  • The cost of storing your gold can be pricey and that cost must be factored into the risk of your investment.
  • Gold has not always been a good investment and you have the added risk of seeing your investment plummet to a lower price than what you paid for it. Additionally, with the added price to secure your gold, the price would have to go up consistently in order for your investment to profit.

In conclusion, many people do like to invest in gold because they feel like they have a tangible investment as well as the power and prestige that are associated with it. The risks however need to be carefully weighed into the investor’s decision before purchasing.

Creative Commons License photo credit: WinstonWong*

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