Why invest in gold ?
Gold has captured the imagination of royalty, investors and households for 1000s of years. You can feel it, touch it, wear it, admire it … but are you familiar with what makes Gold so special and different.
Gold investment Paper currencies pose a risk of being inflated, possibly to the point of hyperinflation. In times of inflation, people seek to protect their savings by purchasing liquid, tangible assets that are valued for some other purpose.
Gold Investment Options
Gold is in this respect a good candidate, since producing more is far more difficult than issuing new fiat currency, and its value does not rely on any particular government’s health. Gold has a long history of being an inflation proof investment. During times of low or negative real interest rates, when significant inflation is present and interest rates are relatively low, investors seek the safe haven of gold to protect their capital.
Reasons to invest in gold
1. Precious Metal because of Limited Supply: Its obvious, gold is a precious metal, known for its “glittering” qualities., but also its scarce nature gives it a lot of intrinsic worth as well. There are only limited amounts of know reserves of gold in the world, and this is one of the things that drives its price
2. Because the supply of gold is finite, gold is seen as a store of value. For this reason, many consider it the best protection against inflation. History has shown that the value of paper money goes down over time, and for this reason they invest in gold because the more money is needed to buy the same amount of gold.
3. Safety: Whenever there is an international geopolitical or economic crisis, gold will likely shoot up in value immediately. This is because at uncertain times, when economies slow down or stock markets are correcting, gold is seen as a safe and secure asset to hold.
4. Lack of Income: Unlike other assets, gold does not generate any income. Those who argue against investing in gold, believe that it is a useless investment because unlike stocks or bonds or fixed deposits, it does not generate any dividends or interest income.
5. Storage and Purity: Unlike paper assets like stocks or bonds, gold has storage costs associated with it. 5 top reasons to invest in gold
Price of Gold
The price of gold is ultimately driven by supply and demand, including hoarding and shedding. Unlike most other commodities, the hoarding and dis-hoarding plays a much bigger role in affecting the price, because almost all the gold ever mined still exists and is potentially able to come on to the market at the right price. Given the huge quantity of above-ground hoarded gold, compared to the annual production, the price of gold is mainly affected by changes in sentiment, rather than changes in annual production.
Advice on buying gold Buy gold in the cheapest form, and generally the cheapest ways to buy gold are bars, krugerrands or sovereigns. Only a specialist gold dealer is likely to give you a good purchase price for gold bars, and then often with less enthusiasm than for krugerrands, sovereigns, or other highly marketable coins. Buy gold when its price is low rather than high. Many people are tempted to buy gold when they hear that the price has risen. Although this can be the right action if the price continues to rise, it is often better to buy after the price has fallen. When trying to compare different forms of gold, compare the percentage over the gold price for each option