Business / Economy
Join in the Gold Rush
23 Feb 2011 at 12:08hrs | Views
The price of gold has increased rapidly over the last decade, allowing the yellow metal to break out of its sticky trading range of US$200/oz – US$400/oz experienced during the 1990s (Figure 1). Last year alone, the gold price increased nearly 30% amid strong demand for the metal as a safe-haven asset as well as an inflation hedge. Robust investment demand further boosted the yellow metal above the US$1,400/oz level.
Investment activity in the gold market has picked up sharply in recent years, with a range of options now available to investors to buy gold or simply gain exposure to movements in the gold price. The four most common ways to invest in the gold market are to buy gold coins, mining stocks, gold exchange traded funds (ETFs) and exchange traded notes (ETNs).
DIFFERENT METHODS OF INVESTING IN GOLD
1. Mining stocks ' Gold mining stocks are a popular way to gain geared exposure to the gold market since mining revenue is, theoretically, a non-linear function of the gold price. However, other factors such as input costs, management and political risks also play a role in determining the value of the stock.
2. Exchange traded notes ' Gold ETNs are investment notes that are not backed by the physical metal but rather by gold futures. There is, however, an implied credit risk to the issuer.
3. Exchange traded funds ' Gold ETFs are relatively cost-efficient and a secure way to participate in the gold market without taking physical delivery of the metal. Costs include management fees.
4. Coins ' Gold coins, e.g. the Krugerrand, offer investors an attractive method of investing in relatively small amounts of gold. They have the same market exposure profile as ETFs but gold coins have the added benefits of being highly liquid, portable and no management fees.
INVESTING IN KRUGERRANDSThe Krugerrand comes in four sizes: 1oz, ½ oz, ¼ oz and 1/10 oz . There are no restrictions on South African investors in buying Krugerrands.
Investment activity in the gold market has picked up sharply in recent years, with a range of options now available to investors to buy gold or simply gain exposure to movements in the gold price. The four most common ways to invest in the gold market are to buy gold coins, mining stocks, gold exchange traded funds (ETFs) and exchange traded notes (ETNs).
DIFFERENT METHODS OF INVESTING IN GOLD
1. Mining stocks ' Gold mining stocks are a popular way to gain geared exposure to the gold market since mining revenue is, theoretically, a non-linear function of the gold price. However, other factors such as input costs, management and political risks also play a role in determining the value of the stock.
2. Exchange traded notes ' Gold ETNs are investment notes that are not backed by the physical metal but rather by gold futures. There is, however, an implied credit risk to the issuer.
3. Exchange traded funds ' Gold ETFs are relatively cost-efficient and a secure way to participate in the gold market without taking physical delivery of the metal. Costs include management fees.
4. Coins ' Gold coins, e.g. the Krugerrand, offer investors an attractive method of investing in relatively small amounts of gold. They have the same market exposure profile as ETFs but gold coins have the added benefits of being highly liquid, portable and no management fees.
INVESTING IN KRUGERRANDSThe Krugerrand comes in four sizes: 1oz, ½ oz, ¼ oz and 1/10 oz . There are no restrictions on South African investors in buying Krugerrands.
Source - Byo24News
