Gold Investing: A Beginners Guide to the Gold Market

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The first part
of investing in gold will be understanding the price of gold and
what effects the price of gold. The price of gold is set by a benchmark
known as the London Gold Fixing, a twice-daily (telephone) meeting
of representatives from five bullion-trading firms. Furthermore,
there is active gold trading based on the intra-day spot price,
derived from gold-trading markets around the world as they open
and close throughout the day.

Today, like
all investments and commodities, the price of gold is ultimately
driven by supply and demand, including hoarding and dis-hoarding.
Unlike most other commodities, the hoarding and dis-hoarding play
a much bigger role in affecting the price, because almost all the
gold ever mined still exists and is potentially able to flood the
market at the right price.

Given the huge
quantity of above-ground hoarded gold, compared to the annual production,
the price of gold is mainly affected by changes in sentiment, rather
than changes in annual production. Investors mainly buy gold as
a method of diversification, while others might buy gold for emotional
reasons like fearing a depression or supporting a political ideal.

How to Invest
in Gold

There are several
avenues for investing in gold: gold coins, mining stock, Gold ETFs,
certificates, gold accounts, and options or futures.

To start out
with Gold Coins are, as many experts believe, the best way to start
investing in this precious metal. First, because of the simplicity
of the gold coins. Starting out you need not worry about the complexity
of many other types of gold investing like ETF expense ratios, undue
leverage, option timing or futures speculation. Instead, by starting
out with gold coins, you’ll skip all the complex forms of gold
investing and move straight into holding an ounce of gold in your

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18, 2010

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