Gold is an attractive investment for the risk-averse, and for the smart investor who knows that they need to balance riskier, high-growth investments with a strategy designed to preserve wealth over time, especially if they’re saving for retirement. Before you start buying gold, there are five things you should know about the market and where you buy.
#1 Gold Dealers Need Deep Liquidity
Gold dealers need deep liquidity – that means keeping a lot of cash available. They need this cash to fulfill orders quickly, so that you’re not left waiting for your gold, and so that you can sell your gold when you’re ready to cash in. One gold dealer in Canada known for its deep liquidity is Silver Gold Bull, which sells gold online.
#2 Gold Protects Your Savings
Are you familiar with bank bail-ins and what they could potentially mean for high net worth individuals with large deposits in the bank? Ever since the 2008 financial crisis, when large American banks received billions in bail-outs to stay open, countries across the world have introduced new systems to protect taxpayers when big banks fail. Under the new regulations, when a Canadian bank faces insolvency, its shareholders and creditors would be responsible. While the government has insisted that individual deposits would not be touched, it’s less clear if that holds true for deposit over $100,000. In Cyprus, nearly half of deposits over 100,000 euros were turned into equity when a bank faced insolvency – taking money straight out of depositors’ accounts. If you’re worried about such an event happening in Canada, storing your savings in gold in allocated storage might be for you. You can find out more about bank bail-ins and how to protect your savings by checking out this blog about investing in gold and familiarizing yourself with the new regulations for Canada’s big banks.
#3 Gold Is Your Stock Market Alternative
When stock markets dip, investors turn to gold. That’s because gold has an inverse relationship to the stock market; typically, when one goes up, the other goes down. Don’t wait for the stock market to dovetail before buying gold; the general wisdom is that anywhere from 10 to 20 percent of your portfolio should be in gold to weather stock market storms.
#4 Allocated Storage For Gold
One important thing to keep in mind is how you’re going to store your gold; many investors prefer home storage, but for very large investments, your home security and a safe may not give you enough peace of mind. There are issues with storing it with a bank as well, since the gold will technically be on a bank’s accounts and they can lease it out to generate interest. Allocated storage, a solution offered by gold dealers like Silver Gold Bull, means that the gold you deposit is the gold you receive when you want it back. It’s stored separately from other deposits, not altogether like it is at a bank.
#5 RRSP Gold
Finally, keep in mind that gold is a trustworthy retirement savings plan, especially if you’re concerned about riskier investments in your portfolio. When you invest in an RRSP, you don’t pay taxes until you withdraw that investment, presumably in a lower tax bracket when you’re no longer earning an income. Gold is eligible for RRSP investments – not only does buying gold protect your income from taxes, gold is your best bet for beating inflation over many years.
With these tips in mind, you should be well prepared to start investing in gold.