Three vital positions in gold investment
Those who are involved in gold investment usually have the following conflicts in their mind:
- When is the best time to buy gold?
- When is the best time to sell gold?
- What is the best item to buy?
- Do we need to buy/sell now, or shall we wait first?
- Is there a chance to buy at the same price point made previously if we sell?
If such conflicts bother you, I can assure you that the issue is not with the gold price, but we are unsure whether to maximize the monetary gain or accumulate grams of gold. The answer to this conflict would not be solved unless we decide our position in gold investment.
Decide our position in gold investment
When we get ourselves involved in gold investment, start by thinking about the position we would like to take on. Are we
- A gold saver? Or
- A gold trader? Or
- A gold business owner?
Gold Saver
When the intention is to save gold for the long term, the focus has to be placed on increasing grams of gold. As long as we have extra cash for savings, we could convert it into gold and save for the long term. The price fluctuations should not bother us, and our focus is on increasing the grams of gold. When the gold price crashes, that’s a big bonus for the gold savers.
The question is, where are we to find money to increase our grams of gold?
The unfortunate truth is, that there is no magic pill for this. The gold bar does not perform ‘binary fission’ (like unicellular bacteria) and creates two bars from one bar. The only way to get additional funds is to work on a side hustle. With the extra income, we can convert the money into gold for long-term savings as we intend to.
Gold Trader
If the purchase is made to sell when the gold price has appreciated, then the focus should be on maximizing monetary gain. Gold serves as nothing more than a tool to achieve this objective.
For example, let’s assume that we have USD 10,000, and we used the capital to buy X grams of gold. When the holdings have appreciated USD 11,000, we would sell off the gold and realise the profit. At this juncture, having an emotional attachment to the gold has to be avoided as it makes no sense to do so.
After setting aside USD 1,000, we repeat buying gold with the same capital of USD 10,000. This time, we might obtain a lesser amount of gold, which is fine. We are not aiming to increase our grams of gold, remember? While waiting for our holdings to increase in value, we could use USD1000 as our profit.
Do you get the idea so far?
Gold Business Owner
For those who wish to increase grams of gold while maximising monetary gain, the best strategy is by being a gold business owner or agent for gold companies. Doing so would help us strike two mangoes with a stone because they act like business owners as agents. As they increase their grams of gold, income from the business is also generated simultaneously.
The gold gets accumulated (via savings), and income increases over time.
A hybrid 2-in-1 stance
If we are not keen to take up the role of a business owner, is it possible to be a gold saver and a gold trader instead?
The answer is yes! The trick here is to have separate funds for different purposes. For instance, let’s say we have USD 30,000 cash. We could potentially allocate one-half for gold savings (by converting into grams of gold) while remaining USD 15,000 for trading. The first part of funds focuses on increasing grams of gold, while the second one is more catered to maximising monetary gain (Buy Low, Sell High strategy).
But, how are we to identify the Low and High price levels?
Studying and learning technical analysis of gold price plays a significant role. This method allows the traders to identify ‘support’ and ‘resistance’ levels, which will help them act accordingly. In essence, traders buy gold when the price is at the ‘support’ level, and they sell when gold price touches the ‘resistance’ level. This price action identification is crucial for traders, but it is less critical for gold savers.
If you find this article useful, consider sharing this with your friends and family. Let's create awareness about our money because nobody will come forward to help us.
Easy way to start gold savings can be found here: Gold Accumulation Program
Join my Facebook page for free here: FB page
Hope you find it useful.
Your buddy on gold investing,
Naresh G