This document discusses the pros and cons of investing in gold. It begins by covering different types of gold investments like bullion coins and proofs. It then lists potential benefits of gold like ease of purchase/sale and portability. However, it also outlines disadvantages such as high premiums, liquidation costs, and storage/insurance expenses. The document emphasizes doing thorough research and buying from reputable dealers. It argues gold can preserve wealth during economic or geopolitical crises, serving as a hedge against stocks and as an alternative currency when dollar values decline. Overall, the document presents a balanced view of both upside and downside risks of gold as an investment.

1. Investing in and
Owning Gold
THE PROS AND CONS

2. POINTS TO BE COVERED TODAY:
 Gold Bullion And Coins
 Gold Bullion Purity
 Gold Proofs vs. Gold Bullion
 Why You Should Consider Gold as an Investment
 The Cons of Buying Gold
 Focus On Fundamentals.

3. Gold Bullion And Coins
 Gold bullion and coins provide a sense of security for many investors, but
there are both potential upsides and some downsides as there are
with any investment.
 If you're an investment advisor, some of your clients might be talking with
gold dealers and exploring the possibility of buying gold even if your firm
doesn't sell it to investors.
 It can help you help them if you're conversant in both the pros and cons of
buying gold as an investment.
 And if you're an investor who's considering the purchase of gold coins or
bullion, you should know the potential risks and rewards.

4. Gold Bullion Purity
 According to the U.S. Mint, American Eagle coins are the
nation’s only official investment-grade gold bullion whose
weight, purity, and content are guaranteed by the United
States Government.
 Each American Eagle Gold Bullion coin is 22 karats (gold is
measured in units of 24). In other words, the coin contains 22
parts pure gold and 2 parts silver/copper.
 As gold is a soft, easily scarred metal, this mixture
strengthens the coins and keeps them looking new

5. Gold Proofs vs. Gold Bullion
 Many new investors are confused by the difference between American Eagle Gold Proofs
and American Eagle gold bullion coins.
 American Eagle gold proof coins: According to the U.S. Mint, these are collector edition
coins minted through a process that “begins by manually feeding burnished coin blanks
into presses fitted with special dies.
 Each coin is struck multiple times so the softly frosted, yet detailed images seem to float
above a mirror-like field”.
 Gold proof coins come packaged with a certificate of authenticity in a protective case and
mounted in a satin-lined blue velvet case. They are available for sale directly from the
Mint.
 Regular American Eagle gold bullion coins: These coins are not purchased for their
rarity or age; instead, they are meant solely as a way to acquire a position in gold as a
precious metal.
 Their value is determined by the given market price for gold at the time of sale or
purchase.
 American Eagle Gold Bullion coins are not available for sale directly from the mint.
Instead, they must be acquired through an authorized dealer, who will sell the coins at a

6. Why You Should Consider Gold as an
Investment
 Gold has become a trendy investment in the millennium and
it's seen numerous price swings—both to the upside and to
the downside, with accompanying volatility. Consequently,
investors who might not have considered gold before have
become interested. Investors give a variety of reasons for
buying gold:
• It's relatively easy to buy and sell coins, such as the
Kruggerand.
• Investors have the ability to test the gold content of the coin
when they buy gold coins.
• Owning and possessing gold can be very satisfying.

7. The Cons of Buying Gold
 Even given these reasons for buying gold as an investment, there are
some good reasons why you might not want to own it.
• Dealers charge premium prices and fees for gold coins.
• Gold has large liquidation spreads.
• It can be challenging to verify old or rare gold coins.
• Storing and insuring gold coins and bullion can be a hassle...and
expensive.
• It's not clear how much price appreciation potential gold might have.

8. So You're Set on Buying Gold
 If you or your clients decide to invest in gold, consider these factors:
• Buying gold for investment purposes isn't the same as collecting gold coins.
• By purchasing gold from large, reputable dealers, investors receive the best
opportunity to liquidate gold if they decide this is what they want to do.
• The physical delivery aspects of owning gold coins and bullion require insurance and
a secure vault in which to store it.
 Individual investors see many televised opportunities to purchase gold coins from a
mint.
 Anyone considering a purchase based on one of these ads should evaluate the
premium asked over the current spot price of gold.
 When the amount differs by 10 percent or more, mint coins may not be the best
choice.

9. So You're Set on Buying Gold-I
 Liquidating gold through the dealer can be expensive.
 Again, clients need to know more about the liquidity of their
investment purchase if the commission premium is 10
percent or higher.
 Krugerrand gold coins from South Africa remain popular.
 They're plentiful, and more dealers create a market in the
coins.
 The purchase and sales spreads may be narrower
because of the sheer numbers of these coins.

10. Pros And Cons Of Investing In Gold
 Gold had a strong run in 2019, reaching a six-year high in the summer as factors
including a weaker dollar, US-Iran tension, global growth fears and a U-turn from the
world’s central banks all worked in the precious metal’s favour.
 The price of bullion jumped above $1,300 per ounce in January, breaking through
$1,500 in July, where it has largely stayed steady since at levels last seen in 2013.
 The surge in the gold price has boosted the returns of gold-focused funds and
ETFs, which have largely underperformed the wider stock market in recent years.
 While stock market conditions do not suggest that investors expect an imminent
meltdown like the financial crisis – the S&P 500 hit a record high this week – there
has been an increase in “safe-haven” buying of assets like gold and the Japanese
yen.
 The United States’ aborted military strike against Iran earlier in the month, which
followed the attack on oil tankers in the Persian Gulf, have made investors nervous.

11. Pros And Cons Of Investing In Gold-
I
 The weakness of the dollar has also helped boost the argument for
dollar-based commodities like gold and oil, which has also increased
in price in recent weeks.
 The Federal Reserve, having raised interest rates four time in 2018, is
now expected to cut rates, which has taken put pressure on the US
dollar after a strong run since President Trump was elected.
 With gold back in the news, we take the opportunity to examine why
historically investors have bought gold, some pros and cons, and how
to get exposure.

12. Pros And Cons Of Investing In Gold-
II
 Gold has many uses including jewellery, electronics,
dentistry, medical and other industrial use - and of course
investment.
 Jewellery is the single-largest individual source of
demand, according to Morningstar director of equity
research, basic materials Kristoffer Inton, followed by
investment purposes, including bars and coins, central
bank purchases, and exchange-traded funds at nearly
40%.

13. Pros And Cons Of Investing In Gold-
III
 Morningstar Investment Management chief investment officer, EMEA, Dan Kemp
says investing in gold remains one of the most controversial exposures for an
investor, as it is arguably a greater fool investment that is said to be fuelled by three
persuasive themes:
• Fear of an economic crisis or inflation outbreak fuelling public demand;
• A change in the sovereign wealth funds asset composition, such as demand from
China, to diversify their holdings; and
• Negative bond yields losing their appeal as an effective hedge against equities.
 Whether as a hedge against rising tension in the Middle East, uncertainty about the
direction of the global economy, or rising fears about escalating tensions between the
US and China, investors commonly turn to gold as a "safe haven" asset class.

14. What Is A Safe Heaven?
 An economic catastrophe like the global financial crisis also causes investors to act to
protect their assets.
 Morningstar classifies an asset as a safe haven if it holds, or even increases, its value
during periods of market and economic uncertainty and downturns.
 The asset should preserve capital, withstand market volatility, and provide
diversification across a portfolio.
 Gold is an asset which is virtually permanent, with no significant erosion of quality
over time, could arguably be considered a safe haven.
 To assess gold's viability as a safe haven, Inton first looked at how gold prices have
trended against the US economy.

15. What Is A Safe Heaven? -I
 "Looking at the changes in the real gold price and real GDP growth
quarter over quarter since 1990, we see that changes in the gold price
hold a weak relationship to US GDP growth.
 We believe this provides evidence that gold is a decent hedge to US
economic cycles."
 Next, he looked at how gold prices have trended against equity
markets.
 "Looking at the changes in the gold price and S&P 500 quarter over
quarter since 2000, we believe the gold price's weak relationship to
the S&P 500 provides evidence that gold is a decent hedge to equity
markets," Inton says.
 "We established that gold's functional purposes, including for
investment purposes that include safe-haven viability, should be

16. Weak Dollar Hedge
 Gold has historically served as a hedge against a declining US dollar and rising
inflation. As Kemp writes:
 "The price of gold often moves in the opposite direction to the US dollar, reflecting the
fact that many regard the yellow metal as an alternative currency."
 To assess gold's ability to hedge against the US dollar, Inton looked at how gold prices
have trended against the real trade-weighted US dollar index.
 "During the massive drop in the value of the US dollar from 2002 to 2011, real gold
prices rose more than 600% from $250 per ounce to $1,500 per ounce," he says.
 "Similarly, a rise in the value of the US dollar after 2011 saw real gold prices drop more
than 30% to almost $1,000 per ounce. Given the apparent negative correlation, gold
appears to be a decent hedge to the US dollar."

17. Weak Dollar Hedge-I
 Inton adds that the historical relationship between gold prices and the value of the US
dollar shows some evidence that gold provides a "decent" hedge to the US dollar, but not
definitive.
 "During the past 20 years, lower US dollar values have tended to correlate with higher gold
prices," he wrote in 2015. "While gold isn't a perfect hedge, there is some empirical
evidence that it provides a hedge against the US dollar. However, we are reluctant to
declare any kind of direct or causal relationship.
 "We suspect that rather than the US dollar affect the gold price, the relationship is actually
the result of being affected by similar macroeconomic factors, such as inflation and interest
rates."
 For investors seeking income producing assets, gold isn't a viable investment choice as it
pays no yield. Also, consider the additional costs.

18. Gold Bars or ETFs?
 Investors choosing to purchase physical gold may need to rent outside storage or a
safety deposit box to store the physical commodity.
 Investing in gold doesn't mean you have to invest in the physical product.
 Investors can gain access to gold through exchange traded funds or buying stock in
gold miners and associated companies.
 The most obvious, but conceivably the most time-intensive way is to buy and hold
physical gold.
 This can be done through dealers, who will also value it for you.
 Hiding it under the mattress is one way to store it, but probably not the safest. Investors
will need to arrange for secure storage, which of course comes with its own associated
costs.
 Home insurers often consider items above £1,000 to be “high-risk” and the price of an
ounce of gold is above £1,100.

19. Focus on the Fundamentals
 Morningstar's Kemp is sceptical about gold’s long-term value to an investor.
"As these commodities have no intrinsic value, returns are governed by the
balance of demand and supply together with the degree of speculation
present in the market," he says.
 "These factors are all extremely difficult to predict and as a consequence,
investment in this area has a low probability of success."
 Kemp highlights that rather than engaging in speculation, Morningstar
focuses on fundamentals – which means our analysis is purely valuation-
driven.
 "This means our analysis of the commodity cycle is purely valuation-driven
and leads to a preference for assets that are undervalued relative to a
conservative estimate of the cash flow they generate.

20. Investing in and
Owning Gold
THE PROS AND CONS

21. THANKS FOR LISTENING
INVESTING IN AND OWNING GOLD