Of all the precious metals available in the world, gold is the most popular and one of the most valuable. It has remained a firm favourite commodity for investors for many years and if anything, has actually grown in prominence as an investment opportunity since the beginning of the credit crisis in 2008. When global currencies fell into disarray, prices rocketed and return capital plummeted; so how has gold managed to remain so strong?
Why do people invest in it?
- The primary component of an investment portfolio is often the traditional stocks and shares but these kinds of properties are very open to sudden fluctuations in value. Diversifying the range of assets contained in your portfolio can strengthen your resistance against dropping prices; a particularly useful layer of insurance in such tough and volatile economic times.
- Gold is considered a great way to counterbalance the effects of inflation. Currencies have almost universally declined in power over time due to the rise in prices for goods and services, yet gold’s purchasing power has remained stoically strong.
- The US dollar is the world’s largest trading currency and when its value depreciates in relation to other currencies then the price of gold will actually rise. With its value actually increasing as other currencies falter; gold is capable of greatly reducing the risk of being left with worthless assets.
- Of all physical commodities, gold is the one with the greatest level of consistency and which is least affected by ‘tail risks’; sudden events on the global marketplace which have an unexpected negative impact on the value of investments.
- Perhaps the greatest benefit of investing in gold lies in its constant demand and supply. Demand for gold has consistently grown in recent years but the mining process remains as complex and time consuming as ever; these two factors help to balance out the price of the precious metal and ensure future stability in its value.
How do you buy it?
- Physical gold is known as bullion and comes in the form of bars and coins. It can be purchased from government mints, privately owned mints, jewellers, online brokers like Bullion Vault and specialist dealers. Different outlets will offer different prices but its value is based on the purity of the gold content within the piece, so be sure to research its true worth on the market and find the best deal. When buying gold this way, it is very valuable but you incur additional costs for insurance and secure storage.
- Alternatively, you can purchase gold certificates, where you own physical gold but it is held in the bank that issued it to you; reducing the risk of theft or damage.
- Gold futures are high risk but can be high reward. You pay a deposit for a set amount of gold for a pre-agreed price to be purchased at a point in the future; this way if the value has risen, you will get the gold cheaper than you would have by just waiting to buy it at the time.
- A more unusual way to invest in the gold market is to purchase shares in a mining company; this way you benefit from the value of the gold reserves held by the business.
- A mutual fund pulls together a number of gold investors and is run by money managers. This allows investors to benefit from all areas of the gold sector under professional supervision; providing a safe way to enter the market.
Is it worth it?
Gold is one of the most stable and reliable investment opportunities available. While it may not be the cheapest commodity to get your hands on, it seems demand will always exist and value is set to continue to rise. In such dire economic times, when the majority of assets and currencies are struggling to survive, gold has emerged as a solid investment.