Risk
Even though investing in gold is generally considered and accepted a great way to diversify your assets and can prove profitable over the long term, there are several risks involved.
The risks of gold investment hinge partly on the type of investment vehicle: buying physical gold, purchasing shares of gold mines, or investing with mutual funds, futures or options. The first risks center on physical risks, followed by political risks, market risks, exchange rate risks and technological risks.
Ore 2 Gold UK Ltd owns and has contractual agreements in place with various mines which may secure the royalties due from any mineral processed.
Mineral investments can be considered a risky investment on the basis that such investments are not regulated by securities authorities unless the form of investment or product is considered a security such as Gold ETFs or Futures contracts.
Further risks are explained in more detail within any agreements that may be issued between buyer, seller and broker.
Ore 2 Gold UKis not authorised or regulated by the FCA. Buying commodities can involve risks. The value of the product can go down as well as up and is not guaranteed at any time. Past performance is no guarantee of future performance.
Trading in Minerals is a high risk activity which may not be either appropriate or suitable for all investors. Investors should therefore ensure that they fully understand the risks involved before entering into any relationship with Ore 2 Gold, Ltd. The investment product are not classed as a regulated product under the Financial Markets and Service Act 2000 (FSMA). Accordingly, investors entering into investment agreements with such companies will not have the protection afforded by that Act or the rules and regulations made under it, including the UK's Financial Services Compensation Scheme.
Physical Risks:
Investing directly in metals, by purchasing bullions (American Eagle, Krugerrand, Canadian Maple Leaf etc.) or numismatic coins opens the door to a number of risks. First, physical gold can be stolen, second you might lose it, third it’s simply a forgery. Not a risk, but a burden, is the storage fees, if the gold coins should lay in a bank’s safe.
Political Risks:
On the one hand, unstable regimes drive the gold price up as in uncertain times people rather tend to invest in gold than trusting national currencies. However, what if the gold mine, in which you have a stake in, becomes nationalized, or the possession of gold is outlawed?
Market Risks:
At the long-term, gold can only become more valuable, as it is a finite material and demand for it rises. However, currently the gold price is at an all-time high. It would be not surprising if a slump will be experienced. This is bad news for short-time investors. This is not so improbable. Look for example at the oil price (also a finite commodity). It plummeted from a record peak of $145 per barrel in July 2008 to $35/barrel half a year later. Even long-term gold investments might not be advantageous. If investors bought in March 1979 gold ($244/ounce), they made in the next thirty years (considering inflation) around 3.75% per year.
Exchange rate risks:
Gold is traded in US Dollars. This creates an additional layer of complexity for investors who mainly trade in other currencies such as Euros or Swiss Francs. Exchange rate risks refer to the risks related to the exchanges where (gold) futures and options are traded. As these exchanges can change rules which have an effect on market outcomes.
Technological Risk:
The gold price is partly governed by demand in industry. What if technological ingenuity explores substitutes for gold, so that demand eases of? This would certainly lead to a lower gold price.
Knowing the risks of gold investment is the first step to anticipate and mitigate them.
Eligible Investor Declaration
Investments through Ore 2 Gold are currently only available to self-certified sophisticated investors or self-certified high net worth individuals for the purposes of the Financial Services and Markets Act (Financial Promotion) Order 2001.