An Infographic by: Scottsdale Bullion and Coin
Investing in gold can be accomplished in 3 popular ways:
- Buy physical gold coins or bullion.
- Buy gold ETFs.
- Buy gold futures.
All 3 methods are great ways to invest in Gold, but physical gold in the form of coins or bullion is one of the best and most enjoyable ways to invest in gold for the long term.
One of the biggest benefits of physical gold is that you own the metal and don't need to worry about transaction costs associated with other types of gold investments. If you are more interested in short term market speculation rather than long term investments, ETFs and futures are usually better investment vehicles.
When analyzing the price of gold, investors will base their investment decisions on fundamental information, technical information, or both. Fundamental analysis could include inflation, the health of the economy and other factors that affect the value of a particular investment.
Technical analysis uses indicators or chart patterns to analyze price movements. In order to use technical analysis you will need to be able to plot past prices on a chart.
One of our favorite ways to determine if it's the right time to invest in gold coins is to use the Power Crossover Method. The Power Crossover Method is a strategy that relies on 3 popular indicators: MACD, RSI, and Stochastics. The strategy can be applied to daily charts of gold ETFS or futures contracts. One of the most popular gold ETFs uses the symbol GLD. The best way to track gold prices is to look at gold futures. The symbol for the gold futures contract is GC.
When investing in gold coins, we would like to see that gold futures, or a popular gold ETF like GLD, is in the beginning of an uptrend. Our Power Crossover Method is one of the easiest strategies to use to determine if a market is in an uptrend or downtrend.
Looking at the daily chart above, bars are highlighted GREEN when the Power Crossover Method rules tell us the market is an uptrend. Bars are black if there is a pause in the trend, or possible change of direction.
Looking at the chart you can see that the beginning of the uptrend started on January 6th. Gold is now approximately $1340 an ounce. Although gold has been moving higher, the best time to invest in gold coins was back in January around $1237 an ounce.
Another opportunity to buy gold was after the FIRST pause in the trend. If you look at the chart you can see this by finding the first black bar on January 22nd.
As of today (3/10/14) we have black bars (the far right hand side of the chart). This tells us that the move in gold has paused, and that we might see a possible change of direction. Since the market has been in an uptrend for so long and the first pause in the trend has already happened, we would like to see a downtrend in gold before considering a new buying opportunity.
So should you invest in gold coins? Gold coins are an excellent way to invest in gold, but it's usually best to buy gold when the market is in the early stages of an uptrend, or after the first pullback. Although there's no guarantee gold will move lower and give us a better entry price, we will wait for a better buying opportunity.