The Future of Gold for New Investors

The Future of Gold for New Investors

With several significant events rocking the financial markets we look at the short and long term future of gold for new investors looking to enter the market. While the economic markets struggle to deal with the fallout of Brexit we’ll take a look at how the gold market reacted.

In a previous blog post on Gold Trends we wrote before about the British European referendum saying that Brexit could give up the soft ground gold had been built upon. We went on to state that Brexit could “usher capital back to risky assets and out of gold.” On June 23 the United Kingdom voted to leave the European Union. How did the gold market react?

The good news for new investors is that the price of gold rose. The Financial Post stated that it rose by as much as 7.8% on the Friday following the referendum reaching a high of US$1,362.60 per ounce. The reason for this is that gold is seen as a safe investment and with so much uncertain speculation on the financial market, investors rushed to safe havens. The Financial Post went on to explain that history indicates that gold usually performs well in moments of low interest rates and accommodative monetary policy.

There are two different types of gold that can be invested in and buyers should be aware of the difference between gold coins and bars. Leading trade and market insight company FXCM states that gold coins have legal status in their country of origin while bars have no legal tender status. They also state gold coins attract investors seeking simple and tangible means to invest. This is due to the fact that investors physically own the coins. In comparison, owners do not physically retain the gold bars they invest in and it is on the speculation market that investment is made. This will make the investment more risky.

Investors who are looking to invest in gold have several options. The Week recommends using reputable companies to store physical gold. One advantage of putting your gold in a company rather than keeping it yourself is safety and insurance. Investors looking to capitalize on a gold fund can hold the gold in their pension using a global investment and management company. As stated in the previous paragraph the investment can be more risky but unlike physical gold you will earn interest.

As an investor in gold it is vital to pay attention to market predictions. So far we have looked at the short-term benefits of investing in gold due to the current financial situation. However in the long term some experts predict a fall in price. Market Watch advises that gold could spend the next 10- 15 years in “ investment purgatory” with investors spending years trying to define the trading balance.

To many investors gold is a safe bet. If you are thinking of investing in gold be sure to know what type of gold you want to invest in and beware of the short term and long term benefits.

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