Gold and silver are two of the most commonly used precious metals on earth. Ever since the dawn of civilization, mankind has used gold and silver in one form or another. Gold and silver have been used throughout the history as currency and in jewelry. Kings and Queens have used these precious metals as a sign of their ranks and status, since then in almost every society gold and silver have become an expression of social status.
The History Of Gold And Silver
If we look at the Eastern cultures, we can see that they place a lot of emphasis on gold and silver especially in the form of jewelry. In countries like India and Pakistan, you can find gold shops in almost every market. These shops sell gold and silver jewelry and the culture of the sub continent in particular emphasizes on gold jewelry where it is gifted to brides on their wedding and is also an instrument to pass down family wealth through generations. The western cultures, investment in gold jewelry isn`t that common as compared to gold and silver bullion.
Jewelry isn`t the only usage of gold. In recent times other perhaps more important uses of gold have come up. Gold is used extensively in electrical appliances and particularly smart phones because of its excellent heat and electricity conducting property.
In addition to this small quantities of gold and silver are also used in traditional Greek and Chinese medicine. Once again in the sub continent, gold and silver edible flakes are sprinkled over desserts. This trend has also caught up with some food chains and we have seen gold flaked burgers, especially in the U.A.E.
Gold and silver, it turns out have numerous uses but their primary use will perhaps always be as an instrument of investment. In this article we will look at some of the ways in which investment in gold and silver can be done.
Gold And Silver Jewelry
This has already been mentioned above; gold and silver are also used for making jewelry. In fact India is the biggest consumer of gold in the world and most of it is used in making jewelry. When you invest your savings into gold and silver in the form of jewelry, you are investing your money not only into gold but also into an art form. Gold and Silver jewelry not only carries gold but also the art of the person or brand that made the design and therefore when you sell gold jewelry it can be priced higher than the amount of gold or silver in it because of the art value attached to it.
Care must be taken while purchasing gold and silver jewelry because unlike bullion, gold and silver jewelry is not stamped. So you have to take the word of the broker or seller about the authenticity of the gold. When investing in gold jewelry one should go for the 24 carat gold as it is of the highest purity.
One major drawback of investing in gold or silver jewelry is that you cannot put this in yourself directed precious metals IRA. Another issue with jewelry is of liquidity. It is not always easily to find buyers at your asking price, you can always sell to a gold seller or broker but there you may get a price lower than your expectation.
Gold And Silver Bullion
Gold and silver bullion remains the primary form of investment in gold and silver. Bullion includes coins, bars and biscuits. This difference is basically because of different weights. Gold coins are the lightest followed by biscuits which can also be considered as a very small bar. Bars are available in different weights starting from 10g and going up to 1 kg bars or even 400 troy ounces (over 12 kg).
1 kg or 400 troy ounce bars are mostly only used by banks or some heavy weight investors. Mostly individuals invest in lighter bars, as they are not only cheaper to buy but can also be divided. You can buy 10 bars each of 10 g or a single bar of 100 grams. The difference in both will be of divisibility. In addition to this, smaller bars carry a higher premium as compared to heavier bars. The premium charge don a bar reduces as its size increases.
Another thing to keep in mind while investing in bullion is that if you are not purchasing this through your Gold IRA, then you will have to think about storage. Small time investors do not need to worry much about storage but if you are going to invest a lot in precious metals then you will need to think about proper storage first. Our suggestion would be to have a look at a gold IRA guide before making a purchase decision with your retirement account.
Another thing to keep in mind is the amount of space taken by gold and silver. Silver is less dense and thus the same volume of silver will take more space as compared to gold. To check this you can take 10 gram bars of both gold and silver and see how their size varies. Same amount of gold will take less space but most amateur investors begin with silver as it is cheaper. It is good to start with silver and then move on to gold, but do something about storage space first if you are going to buy a lot of precious metals.
Gold And Silver Exchange Traded Funds
Exchange traded funds (ETF) are stocks that track the movement of the underlying asset. In this case, gold and silver ETFs track the price movements of gold and silver. The shares of ETF companies can be bought and sold like shares of any other company. So for example if you wanted to buy the share of SPDR (a gold ETF company) then you can simply purchase a single share and that will be equivalent to holding a certain amount of gold, in this case one tenth of an ounce of gold. So by holding ten shares you can invest into almost an ounce of gold.
This investment however is indirect which means that you will not have direct ownership of any gold; you will hold the shares instead. Investment in ETFs is highly liquid, you can trade your shares during the day like you would trade the shares of any company.
ETFs are ideal for investors interested in all the perks of holding gold without actually holding physical gold.
Gold And Silver Options
Precious metal derivative instruments also exist though these are meant for institutional investors. Gold and Silver options allow investors to invest in options and cash out when the option presents a profit. In addition to this gold and silver options are mostly used as a way to hedge the risk of loss. Amateur or individual investors cannot invest in options as it requires considerable investment, institutional investors and companies can invest in precious metal options to hedge their risk and reduce their portfolio risk.
