How Do I Know How Much My Gold Is Worth – Q. Is it wise to invest some savings in gold? And if so, what is a good gold ETF, and what percentage of my holdings should be invested there?
A. Mary, gold has been a store of value for thousands of years and has not lost its luster for many investors today. But is it worth adding the yellow metal to your portfolio?
How Do I Know How Much My Gold Is Worth
Buying gold is certainly easier than ever. While you can still buy bars or coins and keep them in a safety deposit box (or bury them in your backyard), a more practical way to gain exposure is to buy a gold ETF. The most popular of these are backed by physical bullion: they are not simply derivatives linked to the price of gold. The largest is SPDR Gold Shares (GLD), although this is bought and sold in US dollars. If you want to trade in Canadian dollars, you might consider the iShares Gold Bullion ETF (CGL.C), which has a fee of 0.56%.
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Investors who are attracted to gold often see it as a hedge against inflation. If you live in a country that sees a dramatic decline in its currency, they say, gold will hold its value and protect your purchasing power. There are indeed examples of this: you would have been quite content to hold gold rather than paper money in Germany in the 1920s, or more recently in Zimbabwe. If the Canadian dollar were to collapse one day, then those who own a significant amount of gold could suffer less. But hyperinflation is extremely rare in developed countries, and needs to be weighed against all the other risks your portfolio faces.
It is also important to know that – at least in Canada – the price of gold has not been close to the inflation hedge in recent decades. Conversely, from 1983 to 2004, inflation averaged around 3%, but the nominal annual return on gold in Canadian dollars during this period was -0.3%. Adjusted for inflation, that means gold has lost more than half its purchasing power over a 22-year period. During many shorter periods of increased inflation, the value of gold fell. So while gold may protect you from a catastrophic drop in the currency, it is not a hedge against rising prices in more normal times.
In my opinion, there is only one reason to consider adding a small allocation to gold in your portfolio: it can be good diversification. A highly diversified portfolio, by definition, contains assets that are exposed to various risks and behave differently under certain conditions: at the most basic level, you have bonds because they often rise in value when stocks plummet. You can further diversify by adding a small allocation to gold, which has a very low correlation with stocks and bonds. That means it can reduce the overall volatility of your portfolio.
From 1980 to 2017, a hypothetical index portfolio with equal amounts of Canadian bonds, Canadian stocks, US stocks and international stocks returned 10.3% annually with a standard deviation – a measure of volatility – of 11.6%. Replacing the equity with gold in 10% of the portfolio reduced the volatility to 10.1%, although it also resulted in a lower annual return of 9.7%. (All figures are in Canadian dollars.)
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While an allocation to gold may make sense, in theory, I don’t recommend adding it to your portfolio. As we have shown, while it may lower your overall volatility, it probably also lowers your expected return. And if you’re willing to accept lower returns in exchange for less risk, then you’re better off adding more bonds.
I also worry that gold is an emotional asset that can lead to irrational decisions. Like holding individual stocks, it can distract from your long-term investment goals. My guess, Mary, is that if you held a 10% gold allocation in your ETF portfolio, you would spend as much time focusing on that holding as you would on the other 90%.
My suggestion is to stick with a traditional portfolio of equity and bond ETFs, which provide all the diversification you need with lower cost and less complexity.
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This article was co-written by Jerry Ehrenwald. Jerry Ehrenwald, GG, ASA, is a graduate gemologist in New York City. He is the past President of the International Gemological Institute and inventor of the US-patented Laserscribe℠, which uses a laser to inscribe unique indicia on a diamond, such as a DIN (Diamond Identification Number). He is a senior member of the American Society of Appraisers (ASA) and is a member of the Twenty-Four Karat Club in New York City, a social club limited to 200 of the most accomplished individuals in the jewelry business.
There are 17 references cited in this article, which can be found at the bottom of the page.
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How do you tell if gold is real, gold plated or fake? By most international standards, anything with less than 41.7% or 10 karat gold is considered fake. To test your jewelery or gold at home, you can perform a few easy tests – mostly with items you already have, such as water, vinegar and magnets. You don’t have to be a certified jeweler to have a good idea if your gold is real or not, and we’ll give you step-by-step instructions to test your gold right now.
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This article was co-written by Jerry Ehrenwald. Jerry Ehrenwald, GG, ASA, is a graduate gemologist in New York City. He is the past President of the International Gemological Institute and inventor of the US-patented Laserscribe℠, which uses a laser to inscribe unique indicia on a diamond, such as a DIN (Diamond Identification Number). He is a senior member of the American Society of Appraisers (ASA) and is a member of the Twenty-Four Karat Club in New York City, a social club limited to 200 of the most accomplished individuals in the jewelry business. This article has been viewed 7,047,427 times.
To see if gold is real, try dropping it into a glass of water. If it floats, it’s probably not real gold, as gold is very dense. You can also try holding a strong magnet, like the kind you can find in hardware stores, up to the metal to see if it sticks. If it sticks, it is probably not real gold, as gold is not magnetic. Alternatively, try rubbing the metal on an unglazed piece of ceramic to see if it leaves a streak of gold, which could be an indication that the gold is genuine. To learn how to tell if gold is real by looking at it, keep reading! It’s not often we run into gold, but when we do, there may be some serious cash involved. Gold earrings, bracelets and other jewelery have been a huge part of culture throughout the years. It shows a sense of royalty, class, and of course wealth. But real pieces of gold are much more complicated than most people realize. Not many people know the types of gold bars, how to buy them, and how much they are really worth. These precious metals may have much more value than you might think.
Gold is something that has to be clearly identified with how much it is worth, like anything monetary. However, gold bars, and coins come in different sizes and shapes from different bins. Gold bullion can either be cast or minted. Cast bars are where molten gold is poured and solidified. This often causes the bars to be uneven and cheaper but makes them quicker to make and easier to identify. On the other hand, mint bars are cut to required dimension making them flat and smooth. All gold bullion is registered with serial numbers and a certificate of authenticity to prevent counterfeit or stolen gold bullion. The larger minted gold bars usually come with protective packaging to prevent them from being damaged or tampered with. Kinegram is a hologram security feature that is embedded in the package. Bars with this feature are called Kinebars.
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When buying gold, you’ll want to make sure you go to reputable sites to reduce your chances of fraud. Some reputable sites are APMEX, JM Bullion, and WholesaleCoinDirect. You will want to choose the gold bullion based on the weight, size and price. If you’re looking to save some money but still own a gold bar, there are sometimes discounts for larger quantities, using wire transfers or you can even try bidding on eBay, although some of these options also enable you to buy fake products. Be sure to check the seller
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