The main thing to keep in mind before investing in gold is to consider how we will do it. Each gold investment method generates profits differently, so studying how it works is extremely important.
Investing in mining shares generates passive income, buying futures contracts gives us differences in buying/selling, and so on. However, physical methods look very similar and often confuse those just starting out in this world.
One of the most classic examples is: Should I invest in pure gold (bullion) or buy jewelry? This question has several answers, so it is necessary to take some time to explain it adequately.
Therefore, in this article, we will explain the advantages of buying gold in both ways so that you can choose the most suitable one for you.
Gold bullion
As we all know, gold bars are blocks or bars that have a certain weight of gold within their content. Contrary to other forms of gold, bullion is usually made of pure gold, with a range generally exceeding 99% purity.
Therefore, it is much easier to negotiate with it: it has a price that can be perfectly calculated around its weight. In addition, the importance of the gold varies depending on the amount of gold we are looking for: gold bars can usually be found in bars or pieces ranging from 100 gr to 12.4kg in the case of banking institutions.
Gold bullion has a reasonably high value due to its purity and is not usually very negotiable; in addition, its value is only relative to its gold content, making it have no additional value.
This fact means that unlike coins or other gold objects, it does not have any additional subjective value. Bullion is valued as a material, and its cost is only linked to the current gold price.
This situation makes gold bullion an excellent way to protect capital and hold savings. They have the same stability as gold, not varying in price at all, and they also have the liquidity of gold. Selling bullion is not a very common practice, but when the time comes to do it, we will easily find interested people anywhere in the world.
Finally, there is the universality of gold bullion. Unlike jewelry, bullion is known and valued for its content anywhere in the world. This means that their value does not change no matter where we are.
Gold in jewelry
On the other hand, there is gold that we can buy in jewelry pieces. Gold found in this way has more of an intrinsic value so that, in some cases, it can outperform pure gold bullion and undercut it.
However, buying gold jewelry has its setbacks. First, it takes a great deal of expertise to handle gold from jewelry, as about 90% of the time, it is in alloys. This decreases the purity of the gold and involves the need to process it to purify it.
In addition, there is an irregularity around its price since it is sometimes subjective. Various types of jewelry may have the same amount of materials within their composition, but its value increases depending on the jeweler or brand to which it belongs.
This is why it is necessary to have an expert eye to identify the pieces and their potential in the market: either to resell them as jewelry or to process them and sell them as pure gold.
Now, if we go to the benefits, the main one is that since its value is not fixed, it can be bargained. Buying jewelry pieces allows both the seller and buyer to set a price around the value of the gold and the cost it will take to process it. Most sellers tend to negotiate around the price of the gold, regardless of the subjective value the piece may have.
In addition to this, there is also the fact that they are much smaller pieces. In many cases, the investor doesn’t have enough money to buy 100 gr gold bars, while a gold chain does not usually reach those prices. For the small investor, it is advisable to obtain jewelry and accumulate it little by little.
Finally, there is the question of the liquidity of the piece. If we process the article into pure gold, we can always sell it at a price in question, making a profit on the amount of material it contains. However, if we want to make a considerable profit, selling it as jewelry can pay big dividends but involves a more significant amount of patience.
What is the best form of investment in the physical gold of the two?
After looking at the disadvantages and benefits, we may be left with the question of which of the two forms is the ideal way to invest our capital in gold. The truth is that there is no direct way to answer this question.
Each way of storing gold brings its form of profit, so we must be more aware of how much we are willing to do to obtain profit through gold. At the same time, we must also consider our objective in buying gold: whether we are looking to safeguard capital or make a profit.
Gold bullion would be our best option if we only want to safeguard our capital or protect it from inflation. Pure gold tends to vary in price very little unless we are dealing with inflationary periods, and its liquidity is extraordinarily high, so selling it will not be a problem.
On the other hand, jewelry has a much smaller but more lucrative market. Gold pieces from good designers tend to appreciate over time, taking into account more subjective characteristics such as the designer or its rarity.
The truth is that regardless of which one we choose, we should always buy gold from expert, reliable and authorized suppliers. In this way, our investment will be safe, and we will not risk encountering additional problems.
