There is a lot of hype surrounding gold as an investment opportunity. The poor economic situation has subdued the value of other assets, and gold prices have risen as people look for safer investment options.
In reality, the increase in price of gold is a trend that is similar to the recent real estate bubble or the oil bubble. Discerning institutional investors tend to park funds in assets they believe will improve in value, owing to which prices escalate for that particular asset.
This price rise attracts many retail investors, which further drives the prices up. If at this point, institutional investors pull out, the prices could crash and retail investors would suffer because they have bought the asset at a high price.
Before investing in gold, it is advisable to do your homework. Compare it with other potential investments available in the market such as foreign currencies, equities, and metals like silver or platinum. Since the economy has turned, gold has not done as well as equities and other investments like platinum and silver. Moreover, these metals also have real world utility.
Whichever precious metal you want to invest in, there are many ETFs that you can choose from. These funds track the underlying value of an asset and any increase or decrease in the price of a metal will be reflected in the price of that ETF.
You should always be cautious when you are investing in metals, or for that matter, any other commodity. Their prices can be extremely volatile because of lack of visibility of demand from other countries. Investing in precious metals is generally not seen as a good idea for long term investment. But they could be a good choice as speculative short-term investments for getting high returns quickly.
Before you invest in a metal ETF, make sure you know all the basic facts about the market for that metal. This is not the market for you if you are looking for a safe investment option with moderate returns where you can put your money and forget about it for years. You would need to put in a lot of research if you want to make money in this market.
A safer option that might even end up giving you higher returns is emerging markets. ETFs of many emerging market currencies have been doing very well in recent times and it is a good way to cash in on the growth of developing countries.
Speak Your Mind