bullworthy

Want to invest in gold? Great idea!
Gold holds its value for a few reasons. Firstly, it’s scarce, and difficult to mine. Secondly, it’s a tangible block of material that you can hold, therefore it’s valuable. So just exactly HOW is gold valued?
The value of gold is based simply on the confidence the owners, investors, and miners have in it. It’s considered a safe haven away from the volatility associated with stocks, commodities, and even some bonds. In 2008, gold was tested as investors sold off nearly 40% of stocks worldwide, and gold prices help up triumphantly.

 It’s a preserver of wealth; essentially, we will wake up tomorrow, and that gold bullion will not disappear. The exact monetary value, however, fluctuates on the commodities market. A block of gold bullion (the classic bar of gold stored in banks you may be familiar with), as of September 4th, 2009, trades for just shy of $1k a piece. If you want to buy a block of gold, this is the price you would pay today, which many will argue, is somewhat high. Typically, the investment bank which sells the inventory of gold contracts holds the physical gold. You could, however, actually have the gold delivered to your door, but that’s silly and hardly a practice among investors.
As with many commodities, there are many ways to invest in gold. You could invest in gold options, which is a contract that gives you the right (not the obligation) to buy or sell gold at a certain price in the future. The primary difference between futures and options is that obligatory feature. In a futures contract, you MUST buy or sell at that agreed upon certain future price.
This is an advanced trade, and will be beyond the first time investors means. However, there are some smart investments you can make today to cash in on the 21st century gold rush.

ETF’s
An ETF stands for Exchange Traded Funds, essentially a mutual fund that (a) doesn’t lock you into high initial investments or time frames, and (b) returns profits (or losses) on a daily basis, not a monthly basis. All you’ll need to know about ETF’s for now is that they are very simple, safe, and can return higher profits than a mutual fund.
SPDR GoldShares (GLD) is without a doubt the most well known (and most traded ETF by volume) on the market. The closing price today was $97.53. You can buy even just 1 or 2 shares of GLD, and sit for 5 years; we’ll guarantee you’ll make at least a couple percentage points on your investment.
STOCKS
There are a hundred different gold exploration, development, and mining companies on the market that engage in gold production all over the world. A few things to consider:
a) the location of the companies mines. After all, gold is estimated by geologists to exist in larger quantities in different countries.
b) The debt of a company – you don’t want your company to be overwhelmed in liabilities. Check the balance sheet available at Yahoofinance.com.
c) The profitability of a company – relatively newer companies in the gold game have a hard time breaking into this industry because of foreign regulation, barriers, and capital liquidity. So get a company who has been around a while and whose stock price has been beaten down by economic recession.
I Am Gold Corp (IAG) is a model gold stock to buy. They have six mining interests in Africa and South America. They are also diversified; IAG produces many other basic materials including iron, zinc, and copper, whose demand will rise as China and other emerging companies begin to enter extraordinary economic and industrial growth this century. IAG will grow next year (by revenues and profits) nearly 22% as they recover from weak materials demand.
Bullworthy Trends bought IAG at in early 2009 at 10.74/share, while today’s session closed at $14.03/share, a healthy gain.

But still, why gold?
Here’s the main argument for gold – while stock plummeted last year, with market wide losses of around 75% (unprecedented), gold shot up in value because gold is a tangible investment, as opposed to stocks, which is intangible “ownership” of a portion of a public company. Historically, gold has been a haven for protection against a weak US dollar (inflation). Inflation is caused by government spending, which has been significantly ramped up (we’re facing un-thought-of levels of national deficit this year – $3 trillion dollars thanks to stimulus spending).
So inflation, it can be argues is on its way, a great reason to at least have a portion of your investments in gold. Don’t go crazy – a general rule of thumb is that you should have between 15-25% of your investment in inflation-hedging investments.