Investment gold is an investment in real and tangible assets, the amount of which is limited in nature. Gold is a unique precious metal, so it’s still called the “world currency”. Value of gold has increased five times over the past 20 years. Here are some of the main reasons why gold is included in the finance investment portfolio worldwide or simply accumulated for the child’s future, pension or heirs:
1. Independence: By investing in gold, you have the opportunity to independently control the entire process: when, how much, what, and from where to buy coins or bars. Also, decide independently how and where to store, and in which country to sell your gold. The price of gold in the world cannot be affected, for example, by decisions of the United States or another government. It always remains the same all around the globe.
2. Risk diversification: Diversification protects the investor from the risk that a significant part of the portfolio will be lost as a result of a fall in the value of one asset. Classical investment gold is added to the investment portfolio by 5-20%, but in times of global economic changes up to 50%.
3. Gold is a real and tangible asset: Physical gold is 100% your property, you can hold it in your hands, move, store and act at your own discretion. Gold is more than a promise by any specific institution to secure the value and availability of your investments. Your investment can not get lost with the cessation of the institution’s activities, for example, by liquidating the bank. Security risks are managed independently.
4. Available to small and large investors: Gold with a low spread is available starting at ~ 250 €, for example, the world famous coin British Sovereign. Gold bars and coins with a low spread are available in a very wide range of weight, the most common gold coin weighs 1 oz like the Austrian Philharmonic and bars weight around 50 grams like those produced by Swiss company Valcambi. It is not a secret that the purchase of small amounts of stock sometimes involves the imposition of disproportionately high commissions at the time of purchase, as well as regular monthly fees for servicing securities account, which is not always appropriate for a small investor. For example, the purchase of one Apple stock at around $ 175 would cost about 2% of the amount at the time of the EUR / USD conversion, additional bank charges of $ 25-30, as well as the monthly securities account management fee in sense of % or min. 1-2 € depending on the bank’s price list.
5. Compact and valuable investment: Gold is a unique material because it has one of the highest densities of 19.32 g / cm³, which means that the metal is heavy but does not take up much space. A small investment gold coin or bar is of high value due to metal weight, so it is convenient and affordable in terms of storage. For instance:
A 1 ounce Canadian gold coin “Maple Leaf” in diameter is just slightly larger than 2 euro coin, yet its value is around 1100 euro for such a small piece.
Historical gold coin 20 francs “Napoleon III” is as big as a 0.05 € coin, but its value in turn is around 200 €.
6. There are no periodic asset management /commission fees: Unlike securities accounts, accumulative life insurance or other types of investments, physical gold does not have any other costs/fees as at the time of purchase. When purchasing gold, you should take into account a coin or bar spread of 2.5-5%, which includes the dealer’s reward and costs to bring the gold from the manufacturer to you.
7. Gold has high liquidity: Gold bars and coins are widely marketed all over the world. Major markets are located in Asian countries, the United States and the EU. Companies generally provide a high liquidity function, as it is easy to sell gold coins and bars produced in Switzerland, China, Australia, USA, Canada and other countries.
8. A classic supplement or alternative to a pension: Many consider gold as a good supplement or an alternative to future retirement, relying on real and tangible assets in the world. The reason for this is most often considered to be the uncertainty of the future; today’s ongoing global economic development is an experiment that is not described in textbooks. The sustainability of public debt of developed countries is questionable, which can at times lead to a serious financial and economic crisis.
“You have to choose between trusting the natural stability of gold and the honesty and intelligence of members of government. With due respect to these gentlemen, but for as long as the capitalist system lasts, I choose gold.’’ (Bernard Shaw, 1928 year)
9. Easy to inherit: Like other property in accordance with family law, investment gold coins and bars can be inherited. It is important to formalize the fact of inheritance legally by a notary, recording the gold value at the time of the inheritance for capital gains tax calculation purposes in the future.
10. Gold is the property of central banks, institutional and private investors: Investment gold is demanded at all levels. Historically, since gold standard times, precious metals are part of the central bank reserves, nowadays central banks increase their gold reserves, also China, Russia, India and other countries have been actively buying gold over the last decade. Gold is included in investment funds, and people worldwide diversify their investment portfolios with gold coins and bars.
11. Limited supply of gold on the market: The acquisition of gold, as well as the discovery and exploration of new mines, is an expensive and complicated process. The amount of obtained gold cannot be increased/ reduced by decision, just as it is observed in the oil market. Also, unlike paper money, gold cannot be extra printed. According to rough estimates, less than 1 ounce of gold per one inhabitant of the world was extracted from the earth’s depths during the history of mankind.
12. Investor’s air bag: The value of any asset over a period of time depends on the public’s attitude towards it. At a time when financial or geopolitical risks occur, individual countries, regions or, more broadly – elements of the world economy get affected, such as exchange rates, stock prices, value of raw materials. When investors see increased risks and there is an uncertainty in the development of events, the gold as a “world currency” is receiving increasing attention, resulting investment portfolio structure changes in favour of gold.
13. Wide use of gold or dual nature of precious metals: Approximately 60% of the annual gold supply volume is consumed outside of investment purposes. Primary gold is a raw material in the jewellery market as well as an integral part of the industrial world. There are no other assets with such a dual nature. So gold will always be demanded, regardless of the overall background among investors.
14. Investment gold is a long term investment: The holding of physical gold coins and bars in the investment portfolio is not aimed at short term speculation. Gold, like other financial instruments, may have a large price fluctuation corridor as gold is traded on a stock exchange. Classically, the gold market can also be in bull market or bear market state when market adjustments are made, but in the long run, gold retains capital value and purchasing power, as gold surplus is considerably lagging behind financial market instruments and exponential increase in the money supply. There is no “Print” command in the gold market.