Best Strategy to Invest in Gold as Prices Continue to Rise

Gold prices continue to rise on reports that the U.S economy contracted in the first quarter more than analysts had anticipated. World Gold Council’s Managing Director of Investment Strategy, Marcus Grubb, in an interview on Fox Business stated that the rally in prices is partly driven by the fact that many analysts believe the federal funds rate is not going to go higher than earlier thought and that the bonds yield will also continue to recover.

The whole demand and supply for gold has also improved over the past few months further propelling Gold prices. Mr. Grubb says “ since the start of the year, the whole supply and demand picture for gold has improved significantly, from how bad it was last year.” Increased Demand for gold in India and China is also pushing the prices even higher.

Mr. Grubb says that India and China combined command approximately 50% of the physical demand for Gold, which means that these two countries have a massive impact on the prices. The global gold market stands at $250 billion a year according to Mr. Grubb. New York also has a significant influence on the price of gold. Grubb believes that gold prices are set to continue increasing in the second half of the year, making it a worthy investment depending on the strategy.

Considering there are many ways of playing gold; either by buying it physically, buying stocks of gold miners or buying ETF’s. Mr. Grubb advice for a retail investor to play it safe when trading, by engaging in a mixed strategy; In this case Mr. Grubb said:

“I think  really, a physical gold product is a very good way to execute that, probably physical gold ETF if you don’t want the problem of having to store the gold yourself.”

Mr. Grubb also advices on buying a physically backed ETF or mining shares.  Increase of gold mining stocks value in the past was down to the fact that there was huge borrowing when gold was at a high of $1800 an ounce. Problems kicked in when the value dropped to $1300 an ounce.

Disclosure: none