People who consider investing in precious metals like gold often wonder how this sort of investment tends to act with regard to the stock market as a whole, or with regard to gold stocks, as they perceive them. These are natural and legitimate questions, mostly because many people who invest in gold are new at doing so. This is a unique sort of investment that involves a whole new set of considerations, so it does require that a few questions be asked as far as how gold fits in with other stocks. The answers to such questions shed light on how different a precious metal investment really is.
The first thing to understand is that gold bullion and gold stock usually, if not always, refer to entirely different things. You may hear someone mention “gold stock” and still mean gold bullion, but this is not the correct way to distinguish the terms. In fact, gold bullion refers to actual, physical gold that you can buy as its own sort of investment, whereas gold stock usually refers to the idea of investing in a gold mining company. In both cases, to some extent, you are “investing in gold,” but one operates as a resource, and the other as a stock. The more unique of the two, and the one being focused on, is gold bullion.
Again, buying gold bullion means actually purchasing pieces of gold through a company or website that allows you to do so. Effectively, you will be purchasing the value of that gold, to be stored, withdrawn, or sold back at your convenience. Why do this? In most cases, the reason that people trust their money to gold bullion is that they lack confidence in the actual stock market or economy. In times of economic struggle, stocks can be volatile or downright unsafe as investments, whereas gold bullion typically retains as relatively stable value. So, rather than putting your money behind a stock or idea that might tank, you could consider putting it behind something less likely to change in value. This will also help you to avoid the potential consequences should your currency depreciate in value.
Ultimately, the truth is that gold bullion does not relate very closely to any specific stock or other type of investment, nor does it react in any huge way to stock market or economic shifts. This is not to say that the price of gold doesn’t rise and fall – it certainly does. However, these increases and decreases are often more moderate than those we see in the stock market, and are less subject to sudden shifts and changes.
This is a guest post on behalf of BullionVault written by freelance writer Owen Mitchell who writes on numerous personal finance and investment opportunities.