Posted by – July 10, 2011
The world’s love affair with gold is still going strong. Investors are buying up gold products and the demand for investment gold is rising. It seems like a great low-risk investment to add to your portfolio but there are risks involved. If you’re thinking of investing in gold, be sure to weigh out the benefits and risks before making an investment decision.
Gold Investment Benefits
Gold investment benefits include:
- Gold is a solid commodity that has shown a continued increase in value.
- Gold is known as a hard asset because it has intrinsic value that is recognized around the world.
- Gold has more purchasing power than flat paper assets.
- There is a rising demand for gold. More countries are seeking an increased amount of gold deposits.
Gold Investment Risks
When investing in gold, be aware of the following risks:
- Market timing is important when investing in gold. Gold stock prices change based on a lot of factors, including the strength of the dollar. When the dollar is low, gold prices are likely to be higher.
- Gold can be seized by the government to pay national debt at any time. Those around in the early ’70s will remember when Nixon seized gold bullion and gold coins to pay the national debt.
Market specialists are betting that diamonds will a top earner on the market in the next few months. This comes after the news that their prices rose five times faster than gold in 2011. Many believe that prices have leaped due to the high demand from India and China.
In the first six months diamond prices leaped 26% as rough gem production struggled to match the surging requests from jewelry buyers. In comparison, gold only rose 5.6% and reached a record 1,577.57 an ounce in May.
Companies such as Diamond Capital and Fusion Alternatives, look to profit from the surge in prices, as middle classes from China and India continue their interest. The Harry Winston Diamond Corp also revealed in May that it would plan a $250 million diamond fund for the institutional investors.
Despite a selection of companies making profits, there will still be a push for diamonds, as supplies will be expected to fail in meeting the demand. Just last year the industry advanced 17%, with gold also increasing by 30%. According to data, prices rose last week to the highest point since 2002.
Gold prices have surged today due to the combination of a weaker US dollar and the demand from bargain hunters. Traders began buying into the low prices after it fell below US1,49/oz at the beginning of the week. The gold prices have performed a sharp correction in the last few weeks, due to concerns that the bullion was overbought.
Gold’s appeal was that it be counted on as a safe asset. But this reputation took a hit recently when Greece passed the austerity measures. This secured a 8.7 billion euro payment which will help try to reduce the deficit.
Because of this news, gold hit a six week low at US$1,478/oz last week, but has since begun a recovery because of weakness in the US market. The American dollar fell against the euro as speculation circulated that the European Central Bank (ECB) will increase interest rates this week. This will make the euro more attractive and offer better returns than the US dollar.
Posted by – June 29, 2011
When looking into creating an investment portfolio you’ll come across a wide range of different theories and risks. Some people say that you should be defensive when first starting your portfolio, while others disagree. There are so many different opinions on the subject that after a while you don’t know where to look.
The simple fact of the matter is that you should build an investment portfolio you’re comfortable with, and only you will know when this is complete. Of course, this depends on your situation, but you should be both defensive and taking risks at the same time. Without a blend of the two you will fail to keep up with the market.
For defensive minded people there is the problem of inflation risk. Image you are standing in the street with a $5 in your hand. The value of your money will decrease every year you stand in the same position. Until you can no longer use this money as well as you could. In order to fight against the inflation you’ll need to take some risks.
Of course, this doesn’t mean gambling. Simply investing in stocks, or bonds, which are considered safe will help fight against inflation risk. But there are also the options of investing in gold & silver, Treasury Inflation-Protected Securities (TIPS) or annuities.
Inflation is always rising, and to stay standing still will only lose you money in the long run.