The U.S. Federal Reserve has been keeping its printing presses working overtime for monetary stimulus to the fragile U.S economy. Added to that, is the devaluation of the U.S. dollar. With the rate of underemployment at 15% and an almost stagnant rate of job growth; the housing sector in quite a pathetic state; the banking field not very promising, the stock market news conveys its extreme volatility, giving rise to a new wave of inflation that may be just around the corner. However the prices of gold bullion as well as that of commodities are constantly on the rise; which gives hopes for good investments during these times of extreme uncertainties.
Since a little more than a year, the central bank of South Korea has been increasing its reserves of gold bullion and the figure has presently touched around $3.0 billion; almost five times of the value that was thirteen months ago. Even the central bank of Kazakhstan has announced its intentions of increasing its foreign reserves of gold bullion from 12% to 15%. Thus the stock market news reports of an increasing trend of central banks of the East and those of emerging markets steadily buying gold bullion in the recent years.
Also Read: How to Invest in Gold
It has been reported by the U.S. Mint that the demand for gold bullion American Eagles fell by 49% in July to the lowest level since April 2012.But so long as the gold bullion is being continuously bought by central banks, one can safely assume that gold bullion is not a bubble. And with the impending doom of recession, gold has to be given preference for listing on the investment portfolio of one’s individual personal finance. With the beginning of a new business cycle, the prices of commodities are likely to escalate. As the U.S dollar declines in value, there will be more trading of gold; the one asset that ought to feature in the personal finance item of an investor.
Investors have been anticipating fresh monetary stimulus from the Federal Reserve; resulting in a positive market sentiment; hence the stock market has almost recovered from the correction that commenced in the month of May. As gold is presently above its 200-day moving average, the personal finance preference is that of junior gold mining companies. This is because there has been a considerable inflow of capital in these companies. But one should keep in mind that investments in gold and other precious metals must not exceed ten percent of one’s total investment portfolio.
Investments in gold can be by way of tangible coins, bars, certificates, mutual funds, mining stocks and futures. It is considered safe to invest in gold coins and bars. The minimum 99.5% pure10-ounce gold bullion bar, which is the standard industry unit of gold, is good for trading and for storage, with a minimal risk associated with keeping them in one’s possession. When required, one can avail loan against gold. Gold bullion bars are priced at above five percent of the price of spot gold and available in many sizes. Investments in those gold bars that are small-sized; 1 to10-ounced, authenticated by a reliable fabricator and sheathed in plastic would be advisable. The standard gold bullion coins are 1-ounce bullion coins; five percent above the spot price of gold. Examples are American Eagles, the Austrian Philharmonics, or the Australian Nuggets, whose sales are exempt from A-1099.
Purchasing of physical gold should be done from a trustworthy source; with preference for bullion gold coins over gold bars, as the coins can be easily weighed against known values, while the bars can be misused for forging.
It is to be understood that physical gold investments cannot be expected to give returns in the form of dividends as gold mutual funds. There are potential good returns for gold stock investments, but dependent on the prevailing market conditions. So the personal finance recommended is that one needs to keep a gold investment portfolio that comprises a combination of all these forms of gold.