Gold coins and gold bars provide the investors with a sense of security, but there are both possible pros and some cons for any kind of financial investment. If you are someone who is considering the idea of investing in gold coins or bars, it is important to properly weigh the upsides and downsides. Here’s the ultimate guide for you!
We will be taking the example of the gold rate in UAE and stick to this if any concept needs explaining.
The Upsides of Gold as an Investment
In the millennium, gold has become a popular trendy investment and has faced multiple price shifts – both to the high and low, along with volatility. Thus, investors who might not have considered gold have become interested in considering gold as a financial investment. This is because of many reasons, such as:
- The method of buying and selling coins is relatively easier.
- In most cases, investors have the ability to test the coin’s gold content when they purchase the gold coins.
- It can be satisfying to own and possess gold.
- There is a significant potential positive for gold.
- Gold can be easily liquidated by selling it at any retailer at the current gold price in UAE. Therefore, it acts as a great cash cushion in case of any financial emergency.
- It can be used as a hedge against inflation and protection against deflation or massive currency depreciation.
- It helps in diversifying your investment portfolio, as it has proved to show a negative correlation with the other paper investments.
The Downsides of Gold as an Investment
Even though there are given reasons for investing in gold, there are a few reasons why it may not be a good idea to own it, such as:
- The dealers or stockbrokers charge fees and premium prices for the gold coins.
- It can be a great challenge to verify rare or old gold coins.
- The storage of gold coins or bullions can be expensive and it also carries a lot of risk of theft.
- The price appreciation of gold is not very clear.
- It does not provide a steady income, unlike the other financial investments.
The Scale Says Yes!
If you have come to the conclusion of investing in gold after weighing the pros of cons of investing in gold, you should consider the following factors:
- When you buy gold for investment purposes, it is not the same as collecting gold coins. As an investor, when you buy gold from the reputable and large dealers, you will receive the best opportunity to liquidate your investment if they decide this is what they want to do. Insurance and secure storage are required for owning gold bullions and coins when it comes to the physical delivery aspect.
- Liquidating your investment in gold via a dealer can come out to be costly. It is important for you to know more about the liquidity of your investment if the commission charges involved are high.
The Bottom Line
It is important to be clear of your intention and expectations while investing in any form of gold – coins or bullions. If you are someone who wants a steady flow of income during the course of the investment, then gold is not the ideal financial investment for you. This is because gold is a one-time investment and pays you only when you sell it.
You should be certain about investing in gold only after weighing the costs and benefits thoroughly. It is also important to compare the gold rate in UAE offered and the different dealers in the market before making the final choice.