Safe haven par excellence, gold has always attracted investors, and even more so in times of crisis. For invest in this precious metal there exists two methods : buy physical gold, the oldest, or paper gold. While these two solutions may seem identical, they do have some differences that you should know about so that this investment perfectly meets your needs.
What is physical gold?
Physical gold refers to the concrete metal, which you can touch regardless of its form. It can therefore be ingots, bars, nuggets, jewelry or even gold coins.
Available for purchase online or in specialist stores, they are within everyone's reach. And the variety of products allows everyone to invest, whatever their budget because their price will indeed depend on their weight in gold. For example, 1g gold bars generally cost less than 80 euros.
The ingots and bullion Being available in many weights (1g, 5g, 10g, 20g up to 1kg), you can buy the product(s) that exactly matches your budget. As for gold coins, you are spoiled for choice. French or foreign coins, gold coins commemorative, recent or old coins, there is something for all budgets and all tastes, whether you are acollector or investor. Because investing in physical gold means taking advantage of many benefits :
- Products (investment coins or ingots) accessible, varied and easy to buy, and to resell quickly if necessary,
- Un long term investment interesting because it has advantageous taxation (particularly coins) in the event of transfer of assets with the possibility of tax deductions renewable every 15 years,
- Securing a heritage because physical gold is THE safe haven par excellence.
Tips : There is a "premium" on gold coins. The premium is the difference between the purchase price of the coin, and its value in gold. This premium depends on the condition of the coin, supply and demand, the effigy present on the coin in some cases, as well as the seal of the packaging. It can vary downwards or upwards as was the case for the Napoleon in 2007 (+20%), which increases the value of the coin in case of resale at the right time. In times of crisis, the premium can also quickly rise because the demand for gold coins is high.
Paper gold, the other gold investment
Unlike physical gold, paper gold is not tangible but dematerialized because it is a financial product whose price is more or less linked to the stock market performance of gold. Linked to the financial markets and therefore subject to speculation, paper gold is therefore a riskier and more volatile investment than physical gold.
There are several ways to invest in paper gold:
- TheTrackers" Behind this anglicism lies a whole range of funds or ETFs (“Exange Trades Funds”) that replicate the performance of gold. If you buy an ETF, you are simply speculating on its price but not holding any gold! Among these funds are ETPs ("Exchange Traded Products") or ETCs ("Exchange Traded Commodities") which are diversified funds invested in several precious metals such as gold but also silver. With rare exceptions, these ETFs are not backed by a real and tangible quantity of gold held in a bank, which means that you cannot exchange them for physical gold. These are therefore purely speculative funds, reserved for enlightened investors and for a short-term return. Tips : As with any financial stock market product, you will be charged fees (entry fees, exit fees, management fees or custody fees).
- The gold mining shares. Since gold metal is extracted from gold mines, it seems quite logical to invest in gold mining stocks. Be careful, however, because the share price will depend not only on the price of gold but also on the financial results of mining companies, which depend on many factors, including political and social ones (cost of extracting the metal, quantity of gold in reserve, social movements, site closures, political stability of the country, etc.). Since the mines are mainly located in China and South Africa, the quotation is in foreign currencies, which involves exchange fees.
- The gold futures"Or"futures or » are financial contracts "forwards" between two parties, a buyer and a seller. When signing the contract, the buyer agrees to buy a certain quantity of gold from the seller at a set price but at a later date (hence the name "futures"). Throughout the duration of the contract, each party will therefore speculate on the price of gold in order to ultimately have to pay as little as possible. This type of investment is rather reserved for seasoned investors ready to take risks.
So: paper gold or physical gold, which to choose?
The difference in support between physical, tangible gold and “virtual” paper gold is the most obvious. But above all, they are two distinct types of investment.
Physical gold (gold investment coins, ingots, bars) is reassuring because it is tangible and historical. It will appeal to investors who want to secure their savings over the longer term, or be able to resell quickly if they need liquidity.
From his side Paper gold is more for those who like to take some risks, know the financial markets and are looking for quick profitability.
However, it is entirely possible, if you wish to diversify your investments, to invest in physical gold and paper gold in order to benefit from their complementary advantages.
