Questions about gold - newbie investor

EasyToAssemble01

Sorry if these questions seem simplistic, as I'm just getting into investing, and was looking at gold as a possible option.

- Considering gold's relative stability and holding it's value in the long-term, why do people never invest exclusively in gold? I know other investments can yield better returns at certain points, but they come with more risk. Is the promise of better returns the only reason to diversify from gold?

- Gold Pensions / SIPPs: Has anyone looked into these? Would these be a worthwhile pursuit, and (as above) would focussing solely on gold be a bad idea for any reason?.

- Gold buying services: If gold can be purchased direct from the Royal Mint, what are the advantages of buying from a third-party company (eg. Bullion by Post)? Is it just because they have a wider range of gold products from other mints?

Brie

I think part of the issue is how to hold the gold.  Do you actually purchase gold and keep it, where?  In your safety deposit box, a wall safe at home, a bullion holding service?  All come with different risks and costs.  Or are you buying certificates?

InvesterJones

EasyToAssemble01 said:

Sorry if these questions seem simplistic, as I'm just getting into investing, and was looking at gold as a possible option.

- Considering gold's relative stability and holding it's value in the long-term, why do people never invest exclusively in gold?

 I know other investments can yield better returns at certain points, but they come with more risk. Is the promise of better returns the only reason to diversify from gold?

- Gold Pensions / SIPPs: Has anyone looked into these? Would these be a worthwhile pursuit, and (as above) would focussing solely on gold be a bad idea for any reason?.

I'm sure some, slightly odd, people exclusively invest in a single asset, but if you're a beginner (or even not) it's probably a terrible idea. Diversification is a good thing unless you have a crystal ball. It's wrong to say gold is stable and less risky than other investments - the metal is pretty stable, sure, but it's value is not, and as a commodity, it's not a generator of value itself either (unlike a company).

Albermarle

Someone else will probably be along with hard statistics, but I think long term at best gold will just hold its value against inflation. Whilst long term returns from stocks and shares bring actual real growth.
All investments are a risk, including gold, as we can not predict the future.
There are some valid arguments for having gold as part of a portfolio, ( opinions vary) and there are investment funds/ETFS that just follow the gold price, so no need to hold any physically. 

gravel_2

If you are looking at Royal Mint/Bullion by Post I assume you want physical gold. Keep in mind that physical gold is not as liquid as other investments (including funds investing in gold), you are buying above spot price and likely to sell below spot price. Return on investment is not as simple as looking at the spot price chart over time.

mark_cycling00

Id say the main risk is that governments don't want you to do this. 

It would be very easy to outlaw the very small market in domestic gold or add Vat to it without losing many votes at an election.

There are niche investment funds like ruffer who sometimes buy huge amounts of gold when they feel it is a good thing to do. 

There's also a cliché that Chinese, Indian and Arab families buy gold when then come into money and that keeps the price high, but the younger generations probably aren't interested and want bitcoins and exotic holidays instead. 
These 3 billion people could really affect the long-term price of gold. Who knows 

daveyjp

Gold pays nothing while you hold it and it costs you money to keep it safe.

ColdIron

There's nothing wrong with some gold as a diversifier but only once you have all the usual bases covered, pension, ISAs including investment ISAs, rainy day cash fund, mortgage etc

There are some good reasons: It's a good store of wealth (it won't become valueless) but a rotten store of value (gold is volatile). A good hedge against inflation, but not UK type inflation, think Argentina and Turkey. Its lack of correlation with other assets such as equities and bonds. Some tax advantages for UK legal tender coins

But are some bad reasons: It produces nothing, no yield or interest, it just sits there. Volatility

I view it as closer to speculation that investing and I say that as someone who is quite keen on gold

If you are going to buy physical gold then buy bullion, avoid things like the Royal Mint proof coins

I'd suggest no more than 5%, certainly 10% of your wealth

subjecttocontract

daveyjp said:

Gold pays nothing while you hold it and it costs you money to keep it safe.

I bought some gold sovereigns in 2000 at £70 each. I think they each go for £350+ now. I don't know how that compares to average stock investments but I expect you could find out.

I bought some more at auction in 2010 at £160 each.

I've got quite a few full & half sovereigns picked up at various places & times. 

XzavierWalnut

I purchased 2 troy ounce bars about 3 years ago from the Royal Mint, because I wanted to own some gold.
A bit disappointing as they are in a sealed cover and if you cut the bars out you lose the authentication, so although I can look at them, I cannot touch the gold bars. You can buy second hand ones from dealers.
The other issue is, now the novelty has worn off, I worry about losing them in a burglary.

ColdIron

subjecttocontract said:

daveyjp said:

Gold pays nothing while you hold it and it costs you money to keep it safe.

I bought some gold sovereigns in 2000 at £70 each. I think they each go for £350+ now

I see your £70 and raise you £53

Sovs are a shade over £400 now but it's taken nearly 25 years and a very lucky time frame. From the 'Brown bottom' to current all time highs