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A regular purchase of gold bullion can build over time into a significant asset. Gold investment plans provide a structure for turning regular deposits onto regular additions to a gold investment that can balance a portfolio. Some investors go further and center their retirement strategy on the volatile gold market. They aim to capture the upward potential of the swings in gold pricing.
How Gold Investment Plans Work
One particularly simple and direct way to buy gold is the gold investment plan. In a simple description, these financial products provide a depository account under the control of a the host or trader. The client places funds in the account with instructions to use the funds to purchase gold. The trader executes a purchase at the daily commodity exchange price and assigns the value of gold to the clients account. By making regular deposits, clients build an inventory of gold bullion. Many plans offer to pay the account value in physical gold bars or to liquidate the bullion for cash.
What does the Client Get?
The client pays a buyer to pool funds and execute daily purchases of gold from the commodity exchanges. The buyer then allocates the gold to accounts in proportion to amounts paid into the purchasing pool. The buyer gets a paper certificate for the actual gold and a promise that it is deliverable on demand. The insurance costs cover the private guarantee of the gold and delivery. Unlike stocks or bonds the client gets no dividend or expectation of payment. The gold stands on its own as a valued commodity, and the market sets its price.
Commissions and Costs
The costs include insurance, storage, currency exchange fees, and commissions. Many plans offer a commission in the range of one-half percent and costs as low as one-tenth percent. These costs are in line with no load mutual funds.
Evaluating the Plans
The plans administrators provide a trading account and provide for delivery of the gold or liquidated cash amount upon sale. The market determines the price of gold, and it can rise or fall in unpredictable ways. The investor takes the risk of loss and the opportunity for profit in the gold investment plan. Some gold investment plans mix products and urges customers to purchase additional items such as numismatic or collectible gold coins. While collectible coins can surge in value, they can also fall quite steeply. These risks run counter to market conditions that set prices on gold bullion.
Converting Traditional Retirement Investments
One can direct or convert IRA accounts and other retirement savings into gold investment plans. IRA rules require certifications of purity for coins and bullion acceptance into an account held by an Administrator for the benefit of the client. The value of the asset will rise and fall with the underlying market mechanism such as the commodity exchange. Gold is capable of spectacular rises and particularly in the context of haven buying amid world events. Investors that capture it can make significant progress.