After more than a decade in the doldrums, gold is hot again with prices hitting record highs seemingly daily.
And for good reason. The COVID-19 pandemic is still raging, and investors are looking for safe havens. As a result, gold has newfound luster.
“It’s all about the uncertainty with regard to the global pandemic,” says Will Rhind, founder and CEO of GraniteShares, the ETF provider. “People are looking for alternatives to investing in traditional stocks and bonds.”
The government is spending trillions of dollars to support the economy, the number of COVID-19 deaths continues to rise, and it’s not clear what the fall will look like. With so many unknowns, investors are scared. That may not always be the case, but for now, gold is surging, providing opportunities to capitalize, whether you’ve got some to sell, or money to invest.
CASH-IN ON JEWELRY LYING AROUND
With spot prices for gold at record highs, that nameplate necklace from two decades ago and that high school class ring you never wore, is finally worth something! You can hold on to it in hopes it will appreciate more, or you cash out and make some money before the price begins to decline.
The easiest way to sell your jewelry is through a store that advertises it buys gold. These businesses will pay you cash on the spot, albeit at a discounted rate. These retailers may not be on your corner, but often they’re just a short drive away. Pawn shops are another option, but you won’t get the full value for your gold going this route. When a store pays you a spot price, they’re paying you for the actual weight of your gold, with the intention to melt it down, and that’s usually the best bang for your buck. Meanwhile, a pawn shop is usually only paying you a percentage of what the item is worth if they sell it as-is, for its value as a wearable jewelry item.
“As you might expect, it (the price) will be very low relative to what gold is worth,” says Rhind of GraniteShares. “That’s how they make money. They will pass it up the food chain to a refiner who will melt that down and recast the gold.”
SELL IT WHERE IT MATTERS
A better way to unload your gold is to sell it in areas where it’s held in high esteem. “I happen to live in Houston, and jewelry stores in that community often pay spot prices for gold,” says Chris Manske, owner of Manske Wealth Manager and author of the book The Prepared Investor. Also, in New York City, on midtown’s 46th street, which is the heart of the Diamond District, most shop owners buy gold, and many pay spot prices.
For people sitting on gold coins, selling them for cash is just as easy as selling jewelry. Coin dealers exist that specialize in buying and selling coins and small bars. You may not get the spot price, but if there is enough demand you can get near it.
Whichever route you choose, prior to selling your gold it’s important to do your homework about what it’s worth. That means finding out the spot price and how much your gold weighs. Without an idea of what your it’s worth, the easier it is for you to get scammed.
INVEST YOUR WAY INTO THE GOLD RUSH
There’s a lot to be said about owning bars of gold, but that’s not the only way to invest in it. The stock market provides you access to ETFs, mutual funds, and individual companies.
“If you want to invest in gold, there are a number of liquid, low-fee investments that did not exist a decade ago,” says Manske. “The ones that track the spot price are perfect if you want some exposure.”
Gold ETFs give you exposure at a low cost and trade like stocks and bonds. Investors can choose from several different ETFs or go with a mutual fund that invests in companies that support the gold industry. Those funds typically cost more, as some are actively managed. Several gold mining and refining companies are publicly traded, enabling you to purchase shares in a particular business.
SLOW AND STEADY WINS THE RACE
Whether you’re investing in a gold ETF, buying a gold miner stock, or purchasing a mutual fund, experts urge caution, gradually building a position in gold over time. The last thing you want to do is invest a large amount of money into gold at the top. You also have to ask yourself why you’re buying gold in the first place and if it makes sense, taking into account your overall investment goals. “Gold isn’t like buying stocks. The only movement is if there is a perceived increase in demand,” says Norm Champ, author of Mastering Money: How to Beat Debt, Build Wealth and Be Prepared for Any Financial Crisis. “It’s not like you are buying a company that’s throwing off a dividend or income.”
If you want to have exposure to gold as part of your diversified investment portfolio, owning a small position makes sense. But if you think you’ll strike it rich with gold, consider its past performance as an indication of the future.
“The norm is people want to get in on the latest hot trend, but it usually means they are buying something a bit expensive,” says Manske. “If they hold it for any length of time, you’ll probably end up regretting it.”
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