Why Invest in Physical Gold?

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Physical Gold

Gold is one of the most valuable precious metals in the world. It is instantly recognizable in its physical form, and its rich history and diversity of commodities make it highly desirable. You can read more about the history of physical gold here

Many people invest in gold as a way of diversifying their investments or even starting an investment in physical currency. Investing in the precious metal also helps to protect against economic hardship, such as inflation. Indeed, there are endless possibilities with gold. 

How’s Your Economic Security? 

When people are employed, it’s easy for them to feel economically secure. But anything can happen, and savings alone is not always enough to pull oneself through economic hardship. Investing is a great way to prepare for the future by making what you invest in work for you to pay off later. Purchasing precious metals such as gold provides investment that is very different from the legal tender issued by a country’s government. 

When examining your economic security, it is important to take stock of your physical possessions and investments. The more valuable they are, the better. Gold is an example of a possible physical possession as well as an investment that is valuable everywhere and so acts as a backup when other forms of currency don’t work. 

Fiat Money vs. Representative Money

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When we talk about currency or money, most people think about fiat money. Fiat money is paper money that is government-issued and became present around the world when the gold standard was phased out. Here is more information on the gold standard: https://www.investopedia.com/ask/answers/09/gold-standard.asp While fiat money’s value comes from government legislation and regulation, it doesn’t have any value in itself. 

The alternative is commodity-backed money, which is also called representative money. Its value is intrinsic not only because it is valued everywhere, but also because its value is based on the substance the money is made of. 

Types of Gold Investments

You can invest in gold digitally or physically. In the world of digital investment, Commodity Exchange-Traded Funds (ETFs) work much the same way stocks do. You do not get physical gold in return. Instead, you create a basket of securities that can have several different types of investments. 

There are also common stocks and mutual funds, which provide shares of precious metal miners. The best way to invest in gold with this method is to find companies that are legitimate junior gold miners. Unlike the ETF, which moves with the value of gold, mutual funds move with the value of the company and market. Futures and options markets are yet another type of investment, and they offer the largest potential profits and losses with derivative products. 

Certificates represent physical gold ownership but with a crucial difference: There is another entity handling transportation and storage. They don’t have any value in themselves because they’re just paper. 

Bullion is the physical gold as a tangible asset in the form of coins and bars. While not convenient or liquid enough for some investors, it is an option for people who want to prepare for the worst.

Securely Storing Gold

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Gold is durable, stable, and malleable. It is a physical possession that can be vulnerable to theft like any other belonging. However, knowing how to securely store your gold will help you keep it safe. When storing gold, you should keep it in a place with low humidity and stable temperatures. Common options are lock-enabled jewelry boxes or safes for small gold valuables at home. Safety deposit boxes and private gold vaults are also options with unique differences: safety deposit boxes are restricted to banks and bank working hours, while private gold vaults offer a variety of box sizes, privacy, better security, and the ability to store cash. Private gold vaults also offer insurance, unlike safety deposit boxes. 

Benefits of Gold

There are several benefits of gold that other valuables simply do not have:

  • Gold is money. There’s no question that gold has purchasing power anywhere in the world. It’s also been money longer than any other form of currency in existence. 
  • Gold is physically tangible. While you can also make virtual investments in gold, many people enjoy the safety that physical gold brings. It’s also not vulnerable to the risks of digital assets.
  • Gold is highly liquid. Gold is easy to purchase, sell or trade. It can be carried on your person and accepted by any jewelry dealer, pawn shop, coin shop, private party, or online dealer. 
  • Gold is backed by currency. Even when a country’s currency is undergoing inflation, which decreases its value, all major global currencies can still support gold in that country’s currency. Compare to fiat money whose value is only a fraction of that of gold. 
  • Gold cannot go bankrupt. Once you own gold, it belongs to you and only you. There’s no middleman, paper contract, or liability from another entity. 
  • Gold provides an inflation hedge. Even when all major global currencies decrease in value relative to gold, gold still provides a return in both the short-term and long-term. It exceeds the inflation rate, even when the inflation rate is higher than the interest rate. 
  • Gold protects your investments. When you want to maintain your standard of living during any type of financial distress, gold is always something you can fall back on. 
  • Gold creates wealth. You don’t have to only invest in gold to prepare for economic hardship, but to become wealthy. Creating general wealth is also important for many parents who want to pass on their wealth to their children. 
  • Gold diversifies your portfolio. Gold is not affected by equities declining in value. You can also add gold to your portfolio to reduce the risk on a given level of returns. 
  • Gold requires no specialized knowledge to invest in it. Gold does not require any specialized knowledge, unlike digital investments. Anyone can invest in it. 

Gold vs. Other Precious Metals 

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You might be wondering what makes gold the superior choice over other precious metals, such as silver, platinum, and palladium. While both gold and silver are highly valuable, silver goes through more volatile price fluctuations because it has a double role as an industrial metal. The industrial supply and demand ratio for silver means it is equally affected by its applications and not just as a store of value or fashion accessory.