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  • Gold – How much higher will it go?

Gold – How much higher will it go?

Gold prices hit a new high above $1620 on Monday (July 25th 2011) as a result of a powerful cocktail of economic uncertainty, difficult US deficit ceiling negotiations, European Union sovereign debt concerns and the threat to the banking sector.

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There are a lot of reasons why people turn to gold investments. One of these reasons is that the value of gold has a tendency to go the opposite direction in times of economic crisis, when the stock market takes a dip. Gold is considered to be the perfect hedge against the problems that arise with falling prices of the stock shares, and another reason is that gold is also a fine inflation hedge. With the current problems that the economy is facing, high inflation means higher value for gold, thus investing on it secures your financial assets.

In spite of the fact that the price of current precious metal bullion gold coins has tripled since its cost in the year 2000, there are no doubts to the fact that even today, precious metal bullion coins are priced attractively enough and can nevertheless prove to be a great investment. Only if you are advised properly and know what you are doing.

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One of the more common ways people buy gold is by investing in gold coins. However, most people do not know how to buy gold coins and as a result rarely make much return on their investment (or worse - take a loss) simply because they do not know what they are doing when they purchase the coin.

Personally, I think investing in gold coins is an oxymoron. You might collect gold coins or invest in gold, but you do not invest in gold coins (at least not very profitably). Although gold bullion often comes in the form of coins, coins just are not profitable for investors just learning when compared to other methods of buying gold.

The problem with buying a gold coin is that there are a group of people who value it as a collectable (coin collectors) and people who value it as being made out of gold (investors). Both of these factors drive the price of gold coins.

The thing is that these values peak at opposite points of the market. Collectors like to buy things when the economy is good, because that is both when they have the money to afford collectables. Coin markets suffer terribly in recessions.

However, the exact opposite is true with gold. The price of gold soars in a recession and drops when the economy is strong. As a result, when gold is a highest, collectables are at their lowest.

Before investing in gold, please take some advice from your IFA. If you want to proceed and purchase, I can point you in the right direction.

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Lewis Malka

Specialist Engagement rings made in Hatton Garden, London

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