– Nigel Doolin, Head of Trading at Core Bullion Traders.
How much to invest in gold will depend on a number of variables. You need to consider where the price of gold is at the time you are thinking of buying it. Are you going to pay cash for gold or EFT (Electronic Funds Transfer) the cost of the gold? How will you store your gold and how much will storage cost? Also, what kind of return on investment would you be happy with?
Ultimately, you should look at how much you put into gold by realising that your purchase of gold should be seen as your “Wealth Insurance” policy. As gold in your portfolio will act as a type of portfolio insurance – simply by historically outperforming Stocks & Bonds in times of crisis – you should remember that, like most types of insurance when you need it most it is usually too late to get it!
The old adage states: “you should put 10% of your wealth into gold and pray that it never does good!” – simply meaning that if your 10% of gold is doing well, everything else is probably tanking.
How high can it go?
This is obviously the case currently (Covid-19 Pandemic) – where gold is outperforming all other classes of stocks & shares, and the precious metal is giving superb returns to investors who bought into gold in pre-2020 times (at time of writing gold hit it’s highest Euro price ever per/oz).
Considering the price of gold, when you are thinking of buying the precious metal, should not factor too highly on your decision making as, more to the point you should consider how HIGH you feel the price may go from there.
As I stated earlier, at time of writing gold is currently trading at the highest spot price it has ever been, however a lot of industry commentators are saying it can (and should) quite quickly be going to double its current spot price. Even buying now, at the highest spot price ever, may still give amazing returns.
When considering whether to pay cash for gold or EFT – the simple thing to consider (and find out) is does the company you are buying from charge a ‘Cash Handling Fee’? If so, you need to enquire as to the amount or percentage and factor this in to the cost of your purchase.
How will you store your gold and how much will storage cost will influence how much you invest in gold. There are many options here – we advise you rent a safe deposit box and keep your physical gold (and other important/valuable items) in your box. This way you have access to your physical asset any time you require it.
Remember, if you opt for allocated storage or buy ETF’s, you will not receive your physical gold. However, should the institution you have bought through experience go bankrupt, where does that leave you?
Storing gold offshore or in a Swiss Vault – you will usually be charged a percentage of the value of the gold. This percentage may seem small in percentage terms. However if your gold is large then so will your percentage storage fee. Whereas most (if not all) safe deposit boxes have a fixed (relatively low) rental charge. The value you store in the box does not affect the rental price.
How much to invest in gold?
In summary – You should look at gold as a medium to long term type investment. Buy it and store it and hope that you won’t need to cash it in. But if you do need to cash in, do-so – and if that time is during an economic or political crisis, you will hopefully have achieved a good return on investment.
Nigel Doolin is Head of Trading at Core Bullion Traders – A gold trading company based in Dublin, Ireland – he can be contacted directly at: firstname.lastname@example.org or Tel: +353 (0)1 447 5975