Gold is making a slow comeback. The market closed today at $939.00 per ounce with today’s high reaching to nearly $950.00.

If you’re thinking about investing in gold, a good way to familiarize yourself with the terminology is to read auction listings on eBay. Try searching for “gold American Eagle” and just start reading. You can really learn a lot about the different kinds of coins, including how their condition affects their price. And you’ll also notice that they are in high demand.

Stocks

Whenever non-investors think of “investing”, their first thought is usually stocks. Which then is followed by thoughts of uncertainty, risk, and in most recent times during this economic crisis, people would fear buying stocks that are near rock bottom. Bad economy, falling stock prices, what is a young investor to do? Well, let’s see, falling stock prices… Hmmm… Cheap stocks? I know! Buy stock when the market is at the floor! Sure the economy is poor right now, but wounds heal, and given time the economy will regain strength. A general rule of investing is to buy low and sell high. So, to invest in stock now would be a good observation of that rule.

But what about the fact that so many companies are on the verge of bankruptcy and also the many that have already gone out of business? Of course you don’t want to buy shares of a company that’s going bankrupt. That would be dumb. But what you could look for is a company whose business is absolutely needed in this culture. Maybe not many people are buying new cars right now, so the auto industry might not be the best choice. But people still have their old cars and they’ve still got to pump them with gasoline. So perhaps the oil industry would be a good idea. Do some research by looking at companies like Chevron-Texaco (CVX) or Exxon (XOM) on NASDAQ.com. Also, I don’t think people are going to stop using their phones anytime soon, so try looking at different telephone companies, like AT&T (ATT) or Sprint (S).

Just remember, if the company offers a product or service that’s vital to this culture, our way of life, then there might be a better chance for that company to remain in business, even during a recession. I hope this makes sense. For myself this is mostly conjecture, as I am not that familiar with trading in the stock market. Though one more tip I can offer is, do lots of research before investing. Know what you’re doing when you do it and know why a stock might be good to buy before you buy it.

Precious Metals

Metals such as silver and gold are another example of a safe investment during bad economic times. Very often when the US dollar loses value, the prices for gold and silver go up. There are also other things that influence the value of precious metals, for example, the government’s economical decisions. Keep in mind that depending on the circumstances the relationship between the value of metals and the value of the dollar may look different.

It’s important to buy gold or silver when the markets are at a low. They don’t have to be at an all time low, just low enough so you can make a profit when the markets go back up.

For more detailed information on how to purchase an trade gold see Investing in Gold. You may also be interested in reading my articles on Paper Trading Gold where I post weekly updates on the status of gold on the market.

My Investment More Than Doubled in Five Years

In the year 2000 I wanted to buy a little bit of gold to hide away for a few years so I could sell it when it increased in value. I was eighteen and didn’t have much money, but what I did have I wanted to invest. So I went to the local coin dealer and bought a single ounce of gold in the form of an American Eagle coin. I paid $310.00 for it. Now I wish I could have bought more of them on that day.

I hid the coin away for a few years without ever checking if the gold market was moving up in that time. Then one day, five years later, I remembered my investment and looked up the going rate for gold online to see how much my coin was worth. I was surprised to see that it had gone up to a value of $500.00! After that I decided to watch the market everyday to keep track of how much money my coin was worth. Day by day I watched it go up higher and higher. In the next five months my coin increased in value, first $550.00, then $650.00; I watched it go all the way up to $740.00! That’s $430.00 more than I originally paid for it. That’s pretty good for an initial investment of only $310.00. I decided not to sell it just yet though. I saw that the market had potential of going up even more so I hung on to it longer since I didn’t need the money terribly bad right then anyway. Two more years passed and the gold market began climbing even higher. I decided I wanted to cash in so I sold my coin for $790.00, netting $480.00 in profit seven years after I purchased it. The math is obvious; if I had bought 10 ounces instead of only one…

Invest in Smaller Amounts of Gold

If you want to buy gold, but you don’t feel like you should tie up several hundred dollars in your investment right now, then I have good news! Gold coins are made in smaller sizes than just 1 oz. They come in 1/10 oz., 1/4 oz. and 1/2 oz. sizes too. You can invest under $100.00 if you want to. Now if you’re still thinking that’s too much money right now, take a look at that jar of pocket change that’s been sitting on your dresser for over a year. Dump it out and count it. There’s probably enough there to buy 1/10 oz. of gold. Take that jar of change and condense it into one gold coin. There, now the money you forgot you had is actually accumulating worth rather than dust.

When To Buy And When To Sell

The value of gold is moving up and down all the time. One day an ounce of gold will be worth a certain amount and then the next day it could be worth $20.00 more or less than that. So, when is the best time to buy gold? Well, it’s good to buy when the value is lower so you can sell it when it goes back up. The gold market moves like a wave on the ocean—you want to buy when the value is at the bottom of the wave and sell when it’s at the top. What’s left in between the top and bottom is your profit.

Here’s an example from around thirty years ago when it was really a good time to buy gold. In 1976 gold was worth around $100.00 for one ounce. This would have been a great time to buy because over the next four years the value climbed to a record high of about $850.00 in 1980! Imagine having bought ten ounces; in four years you would have made $7,500.00 profit! That’s about $150.00 earned for every month you waited during those four years.

Investment Risks

Like many investment opportunities there are risks that come with buying gold. For one thing, if you buy it when the value is at a record high, it might drop in value soon after that and then it could take quite a long time for it to go back up to a place where you can make a profit. That doesn’t mean that you’ll lose your money though, because most likely the value will go back up eventually; you just might have to wait longer for it. Really, you won’t lose your money until you sell the gold at a lower price than what you paid for it. Gold will always have worth, and as long as there’s inflation it will become worth more and more.

If you have some extra money you won’t miss for a few years, then investing in gold would be a good idea. Just don’t expect to see quick results. Let it sit somewhere safe for a few years or even longer. And remember that you don’t have to sell it until you can sell it at a profit.