Page 43 - Introduction to investing in Gold

In this chapter, I’ve set out my preferences, but I need to stress that these are my preferences, and you must carry out your own due diligence and speak with a financial adviser before deciding what you would like to do.
Short-Term Investing
For shorter-term investing, I prefer to have some physical gold rather than investing in the mining companies. It tends to be less volatile than the mining companies, which can still have production problems that can impact their share price, irrespective of the price of gold. But even with physical gold, you are still taking a risk with the gold price.
However, I like to have some assets that I’d view as defensive—literally a form of insurance—and physical gold would fall into that bucket. Here are what I would view as the main advantages and disadvantages of this approach.
Advantages
If the price of gold goes up shortly after you purchase it, you may be in profit and have an asset that you can quickly convert to cash.
If the currency you acquire the gold in falls whilst you hold it, you could look to sell the gold in a different currency.
If it’s allocated gold (see later), it’s yours.
Disadvantages
If the price of gold goes down, you are left in a losing position.
You must carry out some preliminary research to ensure you are buying from a reputable dealer.
Storage and insurance costs (make sure you are aware of these before you buy gold).
Although the gold price is likely to move, it will not yield anything, so you are reliant on the capital value rather than any income.
38