Throughout history, gold has had several uses due to its irrefutably beautiful color and durability. Over the years, it has been used to make currency, jewelry, electrical apparatuses, and investment products. It’s’ worth has consistently increased, rising from a low of $20 an ounce back in the 1800s to the current average price of $1,900 an ounce.
How is the Return on Gold Calculated?
A gold returns calculator indicates your initial investment and the return rate, showing the interest your investment would generate over a certain duration. However, most calculators available online do not indicate the transaction and management fees incurred when trading gold, meaning the results do not have 100% precision, so remember to factor this in. Some calculators come with an option to add on inflation to your calculation for a more realistic result.
There are three types of calculators: gold price calculator, gold value calculator, and gold weight calculator. They help determine your gold value based on purity, weight and melt value. It is important to understand how a gold investment calculator works.
Who Determines the Price of GoldMembers of the London bullion market determine gold’s benchmark price via teleconference, twice daily at 10:30 am and 3:00 pm (GMT). This has been the practice since September 12, 1919, and the process is known as the Gold Fix. This fixed price is then used for settling contracts among the London Bullion Market Association (LBMA) members.
What is the Average Return on Gold?
As part of a balanced portfolio, gold can be a decent investment as it boasts some of the highest liquidity in commodity markets. The return rate for gold investment at the end of 2019 was approximately 235%, meaning that an investment of £1 made a year before that would be worth £235. Using an investment calculator, you can determine the estimated returns. Gold prices can be volatile short term, though it always maintains its value long term. Over the years, it has served as a cushion against the erosion of major currencies and inflation, making it an investment worth considering.
How to Buy and Sell Gold
Understanding the characteristics and risks of this precious metal is vital. Here we look at a few different ways you can own gold.
Investing in gold futures will most likely require a broker though it is a good way to own lots of gold futures with small amounts of money. It is a good way to speculate on the rise and fall of gold pricing and a way to make money quickly. However, you can lose your money just as quickly as you can make it with futures.
Exchange-Traded Funds (ETF)
ETF’s take away the hassle of physically owning the commodity. They are also more liquid than the physical item, making it easier to trade in and ensuring you get the market price when exchanging them for cash.
Owning the miners who produce gold may be the best alternative for investors in that you earn in more than one way, increasing-price and the miner’s profits. Nevertheless, there are risky miners, and you’ll need to be extra careful in selecting a reputable player.
Owning gold bullions is emotionally satisfying in that you can look at it, touch it, and feel it at any given time. However, you will need to safeguard them as they can be stolen from you physically. Transacting in bars is more profitable as coins may sometimes be difficult to sell at the full market value.
Can You Trade Gold on Forex?
The simple answer is yes, as it is identical to trading currencies, allowing Forex traders to invest in gold from the comfort of their existing trading platforms. Most brokers offer trading opportunities in spot gold priced in US dollars and other major currencies. Most Forex brokers allow traders to invest as little as 10 ounces of gold. It is advisable to conduct your independent research before acting on the information indicated in this article.
If you have a stock trading account, you can also day trade gold through a stock exchange fund like the SPDR Gold Trust (GLD). Since the trust holds gold in reserve, you are trading on gold price movements as the trust value reflects the gold price.
Why Invest in Gold?
Gold has a rich history intertwined into cultures over thousands of years, making its value respected worldwide. Please note that this article is not meant to direct your investment decisions a certain way but merely act as a point of information. There are numerous reasons why traders invest in physical gold. Here, we look at some of them.
Security in Uncertain Times
The Coronavirus pandemic has seen economies crush over a very short period. Gold is one of the few markets that increase in value in an underperforming economy, meaning it barely gets affected by the recession. This makes buying gold one of the few safe investment options. That said, you are advised to conduct your independent research before investing in the commodity.
Gold has a high value and a high density making it easily portable when in physical form. Due to its constant high demand, it is readily converted to cash, and finding buyers isn’t a challenge. For guidelines on your value, you can use a gold calculator UK before you sell.
Defensive Store of Value
Unlike the buying power of some national currencies that have brutally decreased over the years, an ounce of gold has generally maintained its worth, having a purchasing power similar to that of 300 years ago. Those who invest in gold believe it to be a safe-haven as these precious metal prices are not affected by currency devaluation, owing to inflation.
Buffer Against Geopolitical Uncertainty
Gold has been referred to as the crisis commodity as it is relatively safe when world tensions rise, and people dump their money in it for safety. This is because, in times of geopolitical and financial uncertainty, it often surpasses other investments as its price rises more when confidence in governments is low.
As an investor, you ought to spread your risk over various investment options. Investing in gold diversifies your portfolio and limits your exposure to unpredicted financial risks. When financial markets experience poor performance, gold tends to act very differently and will instead rise, limiting the damage to your investment portfolio.
Which Gold is Best for Investment?
There are generally five gold investments considered as the top ones.
100g Gold Bar
These bars are favored by investors seeking greater value for money for investors spending between €10,000 to €50,000. They consist of 24carat pure gold.
Sovereigns offer ultimate flexibility due to their small size and are the most recognizable British coin worldwide. Manufactured by Royal Mint, they are 22carat gold coins and are good for first-time investors looking to spend less than €1,000 and those anticipating strong returns. They are also available for investors spending above €100,000.
1oz Gold Britannia Coin
The Britannia Coin is one of the best-selling products as it enjoys a Tax-Free Status. Manufactured by Royal Mint, since 2013, they are 24carat gold productions; therebefore, they were 22carat. These coins are for large investors spending €10,000 and above. For investment and tax advice, contact your local broker.
1oz Gold Bar
The 1ounce bar is popular with smaller investors spending less than €20,000 and seeking low-margin flexible units. It is the cheapest bar and is made of 24carat gold.
Manufactured by the South African Mint, this is a 22carat gold coin that contains one troy ounce of pure 24carat gold. It is easy to trade and store. It is the world’s most recognizable coin and good for investors spending above €1,000.
Risks Involved in Trading Gold
Gold is generally a speculative investment. While it is a great way to hedge inflation and exchange-rate risk, it is highly volatile, making it a high-risk investment. It is also prone to identity theft, operational risks, and also suffers insurance exclusions.
To guide you, using a historical investment calculator the UK is encouraged. Please note that previous price trends do not in any way guarantee the future performance of this asset. While an investment calculator gives you guidelines, we recommend conducting individual research and getting all the information you possibly can before engaging in gold trading. Liability is not accepted for any loss caused by acting on the information shared here.