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Answer these seven questions before you invest a cent in gold

by , 26 February 2013

With the gold price expected to hit $2,500 by June this year, many investor are using the current gold price of below $1,600 to clamouring into this precious metal. But before you follow suit, warn the investment experts at FSP Invest you need to consider these seven vital questions…

When you rely on stocks and shares for your investments and savings, your financial security’s intimately linked to the state of the world economy.

Right now, the world economy is on a knife edge. That’s why investors are using every price dip they can to invest in gold and add to their gold positions.

Should you be following suit? It all depends on how you answer these seven questions, write the investment experts behind How to Make Money from Gold.

Seven key questions gold investors should ask themselves

1. Why are you buying gold?

  • Is it as a form of insurance against possible economic catastrophe?
  • Are you looking to hedge currency risk or a volatile share portfolio?

2. How much of your total portfolio do you want to invest in gold?

3. How will you hold your gold?

  • Are you going to spread your gold investments between the physical metal (for underlying security) and leveraged instruments like mining shares and ETFs?
  • Will you want to sell and access your cash instantly?
  • Will you want to keep physical gold in your home or would you prefer to be kept in a more secure place, such as a bank vault?
  Remember, how you store your gold is a matter of personal choice. It’s unwise to leave gold coins hidden in the sock drawer. It’s worth having an approved safe installed in your home. It’ll make your insurance company happy too

4. What costs are involved in the gold investments you’re considering?
  • Premiums.
  • Taxes.
  • Commissions.
  • Storage.
  • Insurance

5. Do you plan to trade gold as the price fluctuates? Or are you going to follow a “buy and hold” strategy?

6. What time frame are you investing for?

7. In what jurisdiction do you want to invest?
As part of South Africa’s R4 million yearly offshore allowance, you can use an offshore base to invest. The UK is probably the most convenient investment jurisdiction from a South African’s point of view. That said, Australia and Switzerland offers some great investment options for gold investors.

So there you have it. By answering these questions, you’ll understand the reasons behind you’re buying gold and how you plan to hold it and for how long. This will ensure you hold gold for the right reasons and put together an investment strategy that’ll best suit you.

Answer these seven questions before you invest a cent in gold
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