Joel Greenblatt, one of today's investing gurus and bestselling author of several books, including The Little Book of Stock Market Winners, loves to tell the story of how he once gave a lecture to orthopedic surgeons. One day, after his speech on what the market is and what stocks should be invested in, they started asking him questions like this: “Oil fell by 2.5% yesterday, maybe we should buy a little?” And then he realized that he had failed, and did not speak to the doctors again.
What is this for? Investments, as a rule, are not about what has fallen in price today (yesterday), and not about what has begun to rise in price. That is why I would not like to look at the gold case from the point of view of the latest record, when its price exceeded $1,600 per ounce, and the interest in the “gold” topic that arose in connection with this. As a rule, in such situations there is no shortage of optimistic forecasts. For example, there is an opinion that in the next 12-24 months the price of gold will reach $2000 per ounce.
However, for understanding the modern role of gold, much more important is the fact that over the past two years, prices for this metal have grown faster than the broad US stock market index - the S&P500. It is also important that investing in gold has its own specifics and is very different from how, for example, they buy and sell shares on the stock market. We are not talking about speculation now, but we see before us the usual tasks of a private investor who wants to preserve and increase what he has managed to earn. What should he do if, for one reason or another, he has not yet jumped on this brilliant “train” or, for example, he already has certain gold “reserves” and is tormented by the question: “Should I sell or is it better to buy?”
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Earnings on gold in Sberbank
Since Sber is the most popular bank in Russia, most citizens believe that they should use its banking products. Let's see what prices Sberbank provides us with, what conditions it can offer and whether it is worth looking for alternatives.
Gold cost per gram:
- Purchase: 2,414 rubles.
- Sale: 2,818 rubles..
Compulsory medical insurance:
- Purchase: 2,377 rubles.
- Sale: 2,903 rubles.
Interest is not accrued on such deposits in any case. This means that gold has no special advantages compared to ruble investments in a bank. At the same time, the prices are quite unprofitable in comparison with the market. For example, at VTB at the same time:
- Purchasing compulsory medical insurance: 2,550 rubles.
- Sale of compulsory medical insurance: 2,730 rubles.
As you can see, it will be unprofitable to focus on working with Sberbank. See all compulsory medical insurance offers in banks in your region, analyze the rates and choose the credit institution that gives the best prices.
Exchange Traded Funds
Another good way to make money on gold is by investing in ETFs. This acronym is the equivalent of shares for things that do not represent a share in a company. In our case, this is trading gold without having to buy it. These metal shares are backed by a custodian bank and represent 1/10 of a troy ounce each. They are traded on all major exchanges in the world. There is no need to be afraid of fraud, since the price of shares depends only on the price of gold on the world market. Unfortunately, ETFs have not yet been widely introduced in Russia, but there is an analogue - exchange-traded funds.
Why Forex?
Until recently, stock trading was available only to large corporations, banks and professional financiers. Online trading platforms, among which Forex occupies a leading position, have opened up new opportunities for everyone who wants to make money on the stock exchange. People of different professions and social status were able to achieve success and material well-being, even without having large start-up capital.
Experienced traders and beginners have appreciated the benefits of working on Forex:
- the ability to trade 24 hours a day, 5 days a week;
- availability of a demo version that allows you to acquire the necessary skills without any risk and completely free of charge;
- leverage, ensuring profit with minimal investment of your own funds;
- Russian-language version of the interface, facilitating the work process.
It is worth keeping in mind that Forex trading involves certain risks. However, the possibility of failure is inherent in any investment activity. A balanced and thoughtful approach to work, the use of available risk minimization tools will allow the trader to receive a stable profit.
How to find a deposit
1. The fastest way is to buy an operating gold mining enterprise , which already has a license and approved documents for the extraction of placer gold (land allotment, mining project, etc.). Gold mining enterprises are sold quite often, especially small ones with one or two licenses. The main reason for the sale is a lack of mining equipment or working capital. Banks are reluctant to give loans to small businesses. License holders often find themselves in a hopeless situation: the license must be taken away for inaction, but there is no money for work.
To find and choose a good company, advertise in the magazine “Zolotodobycha” or on this website.
In the ad text, specify where and what kind of company you need. For example, “I will buy an enterprise that has a license to mine alluvial gold in the Republic of Buryatia.” (Examples of advertisements here.)
After receiving offers, you can choose what suits you best in terms of conditions and price. You can buy the entire enterprise, or you can buy a share of the enterprise in order to receive part of the gold mined or part of the profit.
2. It is possible not to buy an enterprise, but to conclude an agreement with the license holder for the development of its deposit or site. This is the lowest budget option. A legal entity - the license holder has the right to mine gold independently, as well as enter into agreements with other legal entities. The license holder is responsible for processing all documents and permits. The mined gold also belongs to the owner of the license, and anyone who works on someone else’s site must hand over the gold to him. The license holder will pay the contractor for the extracted gold at the price established in the contract or under a production sharing agreement.
To find a company, advertise on the website or in the magazine “Zolotodobycha”:
“I’ll rent a plot for gold mining”
Indicate the area and your capabilities: availability of equipment, specialists.
Agreements between legal entities are quite widespread. Especially often, large enterprises contract out undeveloped or remote areas to small mining crews with a couple of bulldozers and a washing device.
Buying a placer mine or working under a contract is a real option to get gold in just a few months.
3. Purchasing a license for a placer deposit at an auction is currently less attractive. There are almost no good placers at auctions anymore. There they may offer something like: “the right tributary of the Vesely River with forecast resources of category P2 - 140 kg or “Upper reaches of the Shiroky stream - forecast resources of category P3 - 40 kg, etc. Forecast resources are “either it will be or not.” And they offer you to find out for your money. After purchasing a license, you will be required to conduct exploration, calculate, and approve reserves, if any. If there are no stocks, then no one will return your money. The consumer rights law does not apply here.
You can start gold mining in the best case scenario in 2-3 years, having spent about 10-20 bp on exploration and other work.
Due to the lack of good properties at auctions, it is more attractive to purchase a licensed enterprise. You can get a good deposit with explored and confirmed reserves and quickly extract real gold.
What type of investment should I choose?
There are many aspects to investing in gold. If you put them together, it will look like this.
Gold bank bars
You need to decide in what perspective you want to make a profit and what risks you are willing to bear. There are quick ways that can bring instant profit, but they are also associated with high risks. These are, for example, options on gold. An option is an instrument that gives permission to buy or sell an asset.
In order to buy options, you need to enter into a contract with a broker company and go to the stock exchange. Options contracts will become more expensive when the price of gold rises, and they can be sold at a handsome premium. This risk is considered high but manageable.
If you don’t want to take risks and are ready to wait, then it is best to entrust your money to real gold or compulsory medical insurance.
Selecting an investment object is only the first step. Next, you need to study the market situation. Check out forecasts and analyzes from various authors. See whose predictions most often come true. This is necessary not only in order to have an idea of possible exchange rate fluctuations, but also in order to learn how to at least approximately predict them.
You need to buy when the price of gold reaches its lowest point, and sell when it reaches its maximum value. Before you buy anything, it is best to observe the market situation with your own eyes for at least a few weeks. At this time, you can try to guess the patterns of its growth and decline.
So, you have made your first purchase, what to do next, how to make money on gold? Here you need to set a profit threshold at which you will sell your asset, regardless of the conditions that subsequently develop in the market. Even though the value of gold rises over the long term, price dips are also common. Therefore, it is very important to clearly set a goal and not to be greedy when achieving it. This is one of the conditions to avoid losing your savings.
Golden coins
Opening of impersonal metal accounts (OMS)
A more interesting way to make money on gold. Purchases are made not in whole bars, but in grams. The main advantage of this method is the absence of taxes. Therefore, it is possible to make money almost instantly on changes in the gold rate, since transactions are carried out quickly.
Another advantage of this method compared to buying bullion is that you do not need to hold gold in your hands. The fact is that if the packaging on the gold is opened or damaged, the gold can be safely sent for scrap as it deteriorates. Because of this, the risks increase greatly.
Using compulsory medical insurance, you don’t have to worry about this issue. Essentially, you buy a gram of gold and are its owner, but in fact the account contains money worth the value of the purchased gold. This allows you to make instant transactions with funds in your account. In accordance with how the gold rate changes, the funds in the account also change.
Buying shares of gold mining companies
Quite a risky way to invest. The essence of making money is that as the price of gold rises, the shares of gold mining companies will rise next.
This method will be effective when there is a crisis or difficult economic situation in the country. In times like these, the demand for gold increases. Since such companies are direct suppliers of the asset, their shares rise in price. You can make money from this.
The problem is that gold itself cannot be wrong. Gold mining companies may well make a mistake that could lead to bankruptcy and loss of all invested funds.
Business on gold
Most modern businessmen have never held real bars or coins in their hands, but they make money on the growth of gold with great success. For this purpose, special financial instruments are used.
- Shares of companies specializing in gold mining. The exchange is considered reliable and liquid: the products of gold mines are bought up every year by owners of jewelry enterprises and government financial institutions.
- Gold futures. During a crisis, they are liquid and in demand. In calm times they bring a small but stable income.
- Experienced brokers always include in their investment portfolio securities of mutual funds working with gold and other precious metals.
Investing in gold on the stock market is extremely attractive for long-term investors. Stock speculators rarely invest in gold: it is “long-term” money that does not give crazy profits.
Investment gold coins
In addition to bullion, banks trade investment coins. For their purchase you do not pay 18% VAT - an obvious advantage. The rest is the same as for ingots. Bank commissions and transit costs are very high, which makes this type of investment unprofitable. But do not forget that a coin is not just an ingot; numismatists and other lovers of investing in antiques will be very happy to buy these coins from you in 10–20 years, when they will no longer be sold. Before you invest in coins, you need to decide whether you are investing in an antique or a precious metal.
Jewelry
Buying some jewelry is another way for an unqualified investor to invest in gold. You can buy rings, chains, crosses and other jewelry. All this looks very nice and can even bring some benefits. If you look at it from the profit perspective, investing in jewelry is a worthless investment. Because it is unlikely that you will be able to resell your jewelry at a higher margin. I won’t say that many fakes are sold in Russia, so you need to buy jewelry only in large stores. In pawnshops everything is much cheaper, but no one there will give you a guarantee that it is even gold.
