Do you agree with Warren Buffet when he says gold doesn’t do anything except just look at you? Well, gold might not be as utilitarian as other worldly possessions. However, it did shape our history, still controls our economy, geopolitics and will continue to do so for years to come. Gold was the catalyst for almost every war or invasion in our history, just like oil is the center of our current geopolitics.
Gold has been here since the inception of human civilization; from an Egyptian tomb, Celtic coins to Chinese tombs, every corner of this world has some gold relic. It was a symbol of wealth and domination. But after hundreds of years, when we are gradually shifting to the digital currency. So, the question arises, when we have other lucrative investment options such as stocks, bonds, or even bitcoins, how much value does this archaic gold add to your investment? Read on to find out.
Why Is Gold Investment Still Relevant?
Out of all the investment options out there- property, stock, bonds, and other lucrative alternatives, you might wonder why invest in gold? The key difference between a gold investment with other investment methods is that it assures steady growth. Here we have explained the prime benefits of investing in gold.
Gold Shields You against Inflation and Deflation
With stocks, bonds, or other investments, you have to be in constant fear of a crash whenever the world is in crisis. Gold investment acts as a hedge against a crisis, whether inflation, currency fluctuation, economic turbulence, or even war. For instance, after the great recession, the price of gold skyrocketed at a record-breaking high. Even if you look at the present scenario, gold price is rising ever since the pandemic hit; people are more leaning toward gold investment because all other sectors are dwindling with uncertainty.
Besides, the government can create money whenever they want, which causes inflation and the value of your money drops. But nobody “produces” gold; its supply is limited and stays constant more or less throughout the years. With a steady supply, you can rest assured of its value.
Investing In Gold Is Preserving Wealth
You might have some family heirloom made of gold that has been passed down to your family. This, right there, proves that gold is considered as a wealth preserver. Where the value of the paper-based currency fluctuates over time, the value of gold remains relatively constant. For instance, suppose you are given the option to keep $100 of physical money or $100 worth of physical gold for fifty years.
Suppose you want to buy a camera with that gold or the $50. But you decide to keep it for fifty years. Now fast forward fifty years, and the value of your $50 bill has dropped. You can no longer buy that camera with that money, but you are free to buy your camera if you convert the gold. Because the value of that gold has either increased or remained unchanged. Inflation or economic unrest can’t degrade gold’s value.
Investors always look for ways to diversify their investment portfolio, and nothing compares to gold when it comes to keeping a stable option open. Investment is all about taking a balanced risk. You invest in something that promises fast wealth growth. But taking that leap of faith comes with an even bigger risk, so you want something safer to back you up, like a gold investment or other precious metal investment. Even if you lose big time, investing a portion of your wealth in gold will ensure you won’t entirely crash and burn.
Besides, the risk factor associated with gold does not match other investment products such as real estate or stock. So it keeps you safe when other sectors are barely keeping their heads afloat. In fact, the gold investment really thrives when the stock market or other mainstream investment faces a downhill. To ensure less volatility in your portfolio, you must achieve a balance between all types of investment.
How Do You Invest in Gold?
Investing in gold allows you to be in physical possession of your investment element, unlike stocks or bonds investment. There are several different ways that you can invest in gold; some require you to buy physical gold, some don’t. For instance, you can own physical gold or buy stock from a company that mines gold; both will be considered a gold investment. Here are some basic rundown of gold investment method:
Gold Bullions, Coins, and Jewelry
You can buy gold bullions, jewelry, collectible coins to own physical gold. Gold bullions are gold bars or coins. You can get them from 1 gram to 400 ounces. While the size and weight of gold bullion make it difficult to carry around, it is more suitable than coins when you have a large amount of gold in your possession.
The value of bullion depends on their metal content, but with collectible coins, you get value for the rarity of the coin. For investment, jewelry is not as popular as coins or bars as they contain alloy that lowers the value.
Exchange-Traded Fund (ETF)
While bullions or gold coins are a great option for gold investment, it is not always practical to own physical gold. You will have to go through a lot of hassle to ensure proper safety for them. One alternative to this is buying gold funds or exchange-traded funds (ETF). ETF allows you to buy shares just like the stock market.
With low initial cost and liquidity options, an ETF is an excellent opportunity for new investors to break into the gold investment scenario. However, the price of gold fluctuates more frequently in an ETF than the physical gold.
The Bottom Line
Gold might be considered a “safe haven” for investment, but don’t get fooled by the idea that gold is a risk-free investment. Don’t dismiss gold investment as the preppers’ way of gearing up for the doomsday or even consider it a rock-solid hedge against inflation. Every investment method has its own sets of risks, and gold investment is no different. You need to make an informed decision before any investment.
Gold is not a wealth-building system, but it does promise to keep its value over the years. It will not rapidly multiply your wealth, but it will ensure a steady value of your wealth. So gold might be a good option to include in your investment portfolio if you want a steady balance of safety and risk factors.