Investors can invest in gold by buying a physical gold product, gold stocks in gold miners & associated companies, and through gold ETFs (exchange-traded funds). There are various reasons for investing in gold these days and the methods to make these investments also vary. Buying gold in which form is totally a decision that the investors need to make if they wish to add gold today in their diversified portfolio.
The spectrum is that gold as an asset offers multiple intrinsic qualities, making it necessary and unique for investors to hold this precious metal in their investment portfolios.
History of Gold
The gold’s history started even before the ancient times of the Egyptians. However, till 560 BC, gold was not the official currency. Afterward, the merchants made a standardized and easily transferable form of money that could make trade easy, resulting in the gold market in the form of gold standard or gold coins.
In addition, gold jewellery was already recognized and widely accepted in various corners of the globe. After that, the importance of gold continued in the UK, Europe, Greek, and Roman empires. Eventually, gold started symbolizing wealth in continents such as Australia, America, Africa, Asia, and Europe.
Australian Bimetallic Standard
Australian government continued the gold tradition by making a bimetallic standard. The corporate authorised representative simply stated that every monetary unit in Australia needs to be backed by silver or gold. The coins which were used as money represented silver or gold. This is how gold rose to fame.
However, this standard did not work forever. After that, the federal reserve was created and used paper form of money that could be exchanged for gold. Later, the demand for gold coins diminished, and paper money was used for every transaction.
Gold in the modern economy
Even though the precious yellow metal did not back the paper money in the past, it still carries importance in the global economy.
To validate this, you can check out central banks’ balance sheets and other financial markets. Currently, these institutes are responsible for holding a major part of the world’s supply of above-ground gold.
Preserve wealth with gold
The main reason for gold being so precious in today’s economic center is that it preserves wealth throughout multiple generations and this has led to a big jump in gold prices. The same cannot be true for paper currency.
E.g., Suppose you had one ounce of gold valued at $35 in the past, and you had a choice to either sell it or hold it, and you could easily buy a brand-new business suit or a nice bicycle. Today you would have lots of substantial amount of money if you had decided to hold gold worth $35 in the past.
This doesn’t take away the fact that you can easily sell gold to reputable gold buyers, if you are in a middle of any financial crisis. Gold is the best possible investment. You can surely take it as a solid money, whose value increases with time.
Gold as a safe haven
Economic and political uncertainty is another reality of the modern economic environment. Because of this, investors majorly look for the safe haven of gold during economic and political uncertainty. History is full of examples during the collapsing empire, the collapse of currencies, etc where gold stocks or gold bullion came to the rescue. But it highly recommended to buy gold bullion from reputed gold dealers.
Investors who had precious metals could protect their wealth and, in many cases, use their commodities to escape. This is the reason the gold price varies. Likewise, whenever there is news of some global economic uncertainty or an impending economic crisis, investors often buy gold as a safe haven.
Gold mining sector
It includes companies that extract gold and can experience high volatility. While evaluating the dividend performance of gold stocks, you should consider the company’s past performance. Also, check for the factors like sustainability and history of paying a dividend for examining the company’s financial statements and balance sheet.
What are the different ways to own gold?
The major difference between gold investment options many hundred years ago and today is that we now have more options to invest in gold apart from the gold jewelry, and gold bullion, in the form of gold mutual funds, gold ETFs, gold companies, gold coins, and futures, gold mining stocks, gold bars, etc. The investors have the option to invest in gold as per their choice of holding gold.
How to balance profit and loss?
Profit and loss depend on gold demand, price of other precious metals, financial assets you own, condition of the stock market, personal circumstances, global economy condition, rising inflation, country’s financial situation, interest rates, price of gold, and mainly on your investment strategy.
To make maximum profit from the gold content, you need to continuously monitor economic crises, check out what the world gold council says about financial uncertainty. In addition to this, you need to keep an eye on gold rose value, stock markets, dollar falls, economic growth, currency devaluation, company portfolios, share prices, the value of other metals, etc.
To minimize the loss (if incurred) you can take the advice of a corporate authorised representative, who encouraged investors to eliminate any negative correlation and do a good investment with current and future gold standards, and store wealth for future crises.
You can also encourage investors to make other investments in gold options along with physically owning and direct exposure. If people invest in a single type of gold, there are chances of loss in the same period of time.
Conclusion
There are both disadvantages and advantages to every investment decision. If you feel owning physical gold is not a good option as a financial asset, you can buy shares in gold mining companies as it is a much safer option.
However, if you think precious metals can be the best bet against inflation, you should invest in bullion, coins, and jewelry as it can lead you to gold-based prosperity and add a factor of diversification to your investment portfolio.
However, if your main interest is to earn profit from the rising gold prices, then the future performance of the market can be your answer, but remember that there is some amount of risk that comes with every investment.
