Gold Is Losing Shine For Investors As Prices Fall

Gold Is Losing Shine For Investors As Prices FallGold is losing its shine for investors as prices fall and yields from mining firms start to drop away.

Since the price per ounce peaked at $1,989 last year, the value of the precious metal has melted away to around $1,300 an ounce, and the decline shows no sign of abating.

The blame, say experts, lies with governments printing money to boost their economies that has down valued traditional ‘haven’ assets that investors coveted as a shelter from economic vagaries.

However, analysts are concerned that alongside the price of gold falling as a commodity, investors are beginning to show the same lack of confidence in mining company shares.

How to invest in gold

This concern is reflected in the performance of funds that focus on gold and gold mining.

Of 2,700 funds managing open-ended investment companies (OEICS) and unit trusts, 60% of the poorest performers concentrated on gold.

Investing in gold is risky, but some investors still have an appetite for the metal.

They can sink their cash into the precious metal in four main ways:

  • Buy gold – Buy bullion in the shape of gold bars. Rather than keep your investment at home, online traders have a gold platform where investors can complete their purchase and have the bullion matched with real gold in a vault.

One of the leading gold platform traders is

  • Buy ETFs – Exchange traded funds are trackers shadowing the spot price of gold that are tradable during market open hours. Experts suggest a gold-backed ETF that holds bullion is better than a ‘synthetic’ ETF which holds derivatives.
  • Buy shares – Invest direct in gold mining companies rather than the metal. This investment is considered riskier than buying gold as the commodity is often easier to sell than shares. One advantage is gold is like oil – whatever the market price, the cost of extracting the commodity is fixed, so rising gold prices mean more profits for the company
  • Buy gold funds – Funds are one way of reducing risk as they invest across a number of mining companies through pooled funds. Nevertheless, they are still open to the same market forces as more direct investments

Golden choice

For investors who have a fancy for gold but do not want a full-on exposure, general investment funds will have some sort of precious metal element in their list of commodities.

Although gold may be losing its shine, many investors feel the metal retains value better than either cash in a low interest rate environment or volatile equities.

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