What are the risks of investing in different types of gold assets

People have been investing in gold assets since the days of cavemen. Gold is valued as a store of valye, as well as used to both enhance and diversify asset portfolios. So clearly investing in gold is nothing new, but before you search for gold rate today Coimbatore or Jaipur and choose a gold investment you should know that there are some risks involved with different types of gold assets that you need to understand as an investor. 

But what are the risks? Let’s find out.

1. Gold ETFs and ETNs Risks

There are risks associated with investing in an ETF, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short-selling and margin maintenance requirements. Ordinary brokerage commissions apply. The fund’s return may not match the return of the underlying index. Additionally many other types of risks may affect the fund.

2. Gold stocks Risks

Gold stocks don’t always move in lockstep with bullion prices and may fall even when gold prices are rising. That diversification offers some protection against the risk that any one company will have problems during a downturn in the gold market. But since most gold stocks don’t produce anything but more shares, they may be subject to speculative runs like Internet companies were in their early days, when many investors piled into these stocks because they thought they would go higher regardless of whether there was any underlying value.

3. Gold Mining Stocks Risks

 The share price of a mining company doesn’t always reflect the true value of its underlying assets. For example, it might have a large number of gold reserves that are costly to extract or have toxic elements such as arsenic that require expensive remediation efforts. These expenses reduce profit margins and hurt the stock price.

4. Gold Mutual Funds Risks

The biggest risk is that, if you don’t choose a fund with low fees, then their expense ratios can eat into the fund’s earnings. The second-biggest risk is that, if your gold fund relies heavily on futures contracts, then the fund might not perform as well as expected if a sudden drop in prices occurs.

5. Gold bullion risks

While investing in gold bullion is probably the most common form of investing it is also arguably the riskiest. It certainly involves more than checking gold rate today Hyderabad or for any other place and then making blind bets. When you buy physical gold someone might probably steal it. So the threat of theft is persistent with owning gold bullion. Secondly challenge with gold bullion is relatively low liquidity compared to the other forms of gold investment. When you decide to sell the gold bullion and at the time you decide to do it you may not get the market value you think you should get. This is especially common with gold coins. Hence if you are in urgent need to sell your gold you may need to settle for a lower selling price than what you should be getting as per the national market.