Investment opportunities in Gold
June 6, 2008 – 3:17 pmA true investor is always looking for the next lucrative opportunity to complete his diversified portfolio. Gold has seen its popularity grow over the past few years has an important investment alternative, particularly desirable due to booming world demand and as a stable asset in times of financial market volatility.
In today’s modern market gold prices are driven by supply and demand. Currently global production sits at 2,500 tons per year whilst the demand is about 3,500 tons, although not all of the annual production goes to retail investors and exchange traded gold funds. Actually the lion’s share is utilized in the fabrication of jewelry and other consumer goods.
Investors might buy gold for a number of reasons namely to diversify their portfolio or as a safeguard in time of economic depression or other serious financial crisis. In other words gold is normally at its highest demand in times of political and financial market turmoil. Contrary to what happens with other commodities, gold is extremely susceptible to hoarding and disposal techniques which play a large role in unsettling the price of this commodity. This is possible because nearly all of the gold ever mined is still in circulation and can enter the market at any given time. Central banks and other monetary funds also possess an important position when determining global gold prices. These organizations are believed to own approximately 19% of all gold reserves though an agreement has been reached between major players, limiting the annual sale to only 400 tones. Due to these particular characteristics the price of gold is more depended on the quantity on sale than the annual production.
When it comes to investing in gold the easiest and most common alternatives are gold futures or gold mining shares. The first requires a commodity broker and is more intended for speculators whilst the later is an investment on the actual mine. The basic idea is to earn a return if the demand of gold increases at which time the mine’s shares should also increase.
Finally, investors are presented with a few plausible alternatives when wanting to purchase physical gold at affordable prices. Currently the most popular are sovereigns which are exceptional gold coins still in production today. Another very well-liked gold coin is the Krugerrand mainly because they are available in large quantities making them the perfect solution for smaller investors looking to start building a portfolio.