The one precious metal that’s been traded across the world throughout the ages
There’s a reason gold has been sought out as a store of value for thousands of years. It’s gold. It’s real, it’s heavy, and it’s rare and in demand the world over.
Those looking to protect wealth in a vehicle capable of standing the test of time should consider gold as a component of a balanced portfolio, particularly as other investment classes including the previously indomitable property market lose their lustre.
That’s according to Tony Coleman, managing director of New Zealand Gold Merchants (NZGM) and a seasoned expert in the precious metals industry. He says the beauty of owning gold is the risk you don’t take by owning it. “Gold is not an investment but stored wealth. It is the ultimate money as it has no leverage unlike fiat currencies and that means it does not get inflated away. That makes it is highly a stable means of storing wealth.”
As inflation increasingly bites, stock market returns look shaky, and overheated markets spiral back to a semblance of normalcy – including rapidly retreating property prices – Coleman says gold offers additional benefits. “It has no counterparty risk, it is extremely liquid and is a contrarian, meaning it is not closely aligned to other markets such as Stocks and Treasuries, therefore a safer place to ride out volatility– it goes up when other investments go down, and that’s what you want in a portfolio,” Coleman explains. “You want to be rescued by a market that is going up when others are going down.”
This makes it an ideal ‘protection’ component of a balanced portfolio. “During slower economic growth phases when other components of the portfolio are not performing, it has been proven over and over again that gold protects the investor against losses.”
Drawing on his years of experience in precious metals, Coleman offers six tips on how you too can own gold bullion with strategies for acquisition and growing a solid portfolio.
Tip 1: Purchase as soon as possible
The earlier you start buying gold, the sooner you improve the security of your portfolio. Coleman’s view is that gold should make up 20% of a well-balanced portfolio, providing a sound hedge against financial uncertainties. However, while he strongly advocates buying early, there’s more to it than simply putting a full allocation into the metal immediately.
Tip 2: Learn how pricing is determined
Buying gold is easy; easier in fact than purchasing stock on the markets. However, as with any investment, Coleman advises conducting thorough research so you can make informed decisions. “Familiarise yourself with basic terminology and study the market. Look at charts to observe the trends. Recognise which precious metals might attract GST, making them more expensive,” is his advice. Gold and silver don’t attract GST, while some other metals do.
Start with the spot price, says Coleman, which is based on supply and demand around the world for 100 oz paper contracts for gold or 5000 oz paper contracts for silver. The spot price is set in US dollars and with the metal measured in Troy Ounces (oz), he explains that the actual price is always above the spot ask price, as margins are added to cover any costs associated with producing the gold. These costs include importing, minting and manufacturing, with those more expensive products attracting higher margins.
Tip 3: Invest using a local brand for the best value
That’s right, there are various brands of gold bullion available on the open market, and you can choose from local or international options. Internationally sourced gold will have associated more costs such as shipping and customs fees, which reflects in the price charged to the investor. The sale price, however, is determined solely by the weight and purity of the product, regardless of where it comes from. NZGM offers both international and local gold brands and even offers its own ‘NZ Pure’ product. So, you can buy locally sourced and refined metal at more competitive prices.
Tip 4: Time your buys
Tip one was getting started sooner rather than later. Tip four doesn’t contradict that, says Coleman, who advises buying gold in calm markets. The herd stampedes in one direction, he explains, having observed that people buy gold emotionally and react to bad news in unison. Economic turmoil usually drives up the price, such as when demand ramped rapidly due to the pandemic and lockdowns, or when Russia invaded Ukraine. This results in anxiety-ridden, hurried decisions from ‘fear of missing out’ (FOMO). “Buyers should understand that rapid price increases can reverse just as quickly. Consider long-term performance rather than spikes.” Never make emotional investment decisions, and never fall for the FOMO.
Tip 5: Think small, frequent amounts in the long term.
Coleman says smart money purchases frequently in small quantities, rather than dropping a large lump sum or full portfolio allocation in a single transaction. Buying regularly over a longer period smoothes out highs and lows of price fluctuations, ‘dollar cost averaging’ into the metal. This approach allows the shrewd buyer to take advantage of optimal buying opportunities, too. And nothing beats regular investing over time.
Tip 6: Use a trusted source.
All that glitters is not gold, as the old Shakespearean saying goes. As with any financial or investment transactions, getting involved in the gold game requires careful due diligence. Coleman again stresses the necessity for thorough research and advises dealing with reputable sources offering appropriate expertise and a proven track record in dealing with precious metals. Bullion companies stand behind the products they sell, be very aware of buying from Facebook marketplace or trademe where there are no guarantees on what you are buying. Also, these market places are on average much more expensive than trading directly with a Bullion company.
For more information on the spot price, visit Gold Price Today > Gold Spot Price NZ // Platinum & Silver Pricing (gogold.co.nz)
Learn more about buying and selling gold – Buy Gold & Silver NZ > Silver & Gold Bullion, Coins & Bars Online (gogold.co.nz)
Visit New Zealand Gold Merchants www.gogold.co.nz