The yellow metal has historical and cultural value that can be preserved for millennia (gold is the oldest asset still in existence). It is also used in technological developments, at the same time being part of the reserves of many central banks around the world, jewelry and investments.
How can you invest in gold?
Investing in gold can be done in two ways, both with their advantages and disadvantages. The first and safest way is through the process of buying gold of physical investments, in the form of coins and bullion. This method gives you, the investor, control over your investments. Once you choose a legitimate precious metals dealer that you trust, this way of investing in gold can give you the certainty that the gold is there, you can hold it in your hands.
The second way to invest in gold is through exchange-traded funds (ETFs). These ETFs allow you to trade gold during trading hours at a price as close as possible to the international price of gold. That’s because premiums are very low due to lower costs. When you buy “paper gold”, you are buying the right to a certain amount of gold, which may or may not be stored in a vault.
Thus, you are exposed to counterparty risk, which means that your investment is dependent on someone else.
All this greatly affects the price of gold. So far this year, the price of gold is up more than 5%. But who should be interested in watching the price of gold and when should they decide to watch it?
Who should be watching the gold price?
The answer to this question varies widely. First, it depends on whether or not you own gold in one form or another. Second, it depends on what the purpose of the investment is.
Here, we will list the cases of people who own gold.
You are a gold bug
A gold bug is a person who is fascinated by the world of precious metals. It is very likely that your portfolio consists mostly of gold. You buy gold constantly (about every month), so you should keep a close eye on the price of the yellow metal. As a true gold bug, you will definitely own more physical gold.
You are a speculator
Gold, like any other financial instrument, can be used for speculation. If you are a gold speculator, you surely own more gold ETFs than physical gold. You are interested in quick returns. With every spike in the price of gold, you make money. You watch the price of gold all day, but also economic news so you know how to position your trades.
Buy gold for kids/retirement
For parents or those insuring for retirement, checking the price of gold daily is a waste of time. Your interest revolves around the long-term benefits of gold. You are more likely to buy physical gold because gold ETFs can go bankrupt. You like to keep things safe. However, we recommend that you check the price of gold before buying. Of course, no one can predict the future, but this can give you an extra emotional incentive to keep buying as the price of gold rises over time.
Buy gold to hedge against inflation/diversify your portfolio
In both cases, your attitude towards gold is similar. You want the protection that gold gives you when other assets (stocks or bonds) lose value. Gold is well known for being the main pillar of resistance in an investment portfolio, especially during times of uncertainty. In an inflationary environment, gold greatly protects the purchasing power of your savings.
In conclusion, the answer to the question of when you should keep an eye on the price of gold varies depending on why you are buying gold. Of course, the list we presented may have its limitations. We can also consider someone buying gold as a gift, in which case tracking the price of gold is again not useful. The answer depends on you as a gold investor.
