All About Gold Investment
For ages, gold has been a timeless splendour, being perceived as the safest instrument for investors’ diversification. When inflation beats in, gold prices surge offering a hedge against riskier assets. Presently, there are six forms of gold investment officially traded, including bullion (gold bars and coins), ETFs and mutual funds, mining stocks, futures and options, digital gold, and jewelry. Globally, central banks reserve a third of the total gold supply for emergency provisions. This suggests, you still got high hopes to discover your golden path!
Conventional but kingly, every piece of gold bullion is certified for its weight and purity, with a serial number embedded for security concerns. Gold coins come in smaller sizes, making them a more lightweight and affordable option than gold bars.
Second, gold ETFs (gold exchange-traded funds) offer much lower initial costs, and investors can buy their shares similar to buying stocks. Compared to mutual funds which also operate under asset management, gold ETFs provide lower risks to beginners. Conversely, gold mining stocks are gold mining companies that have been listed in stock markets, whose prices vary depending on the company’s performance.
Next, gold futures and options store the maximum risk among all. The futures contract allows you to buy or sell some amount of gold at a certain price in the future, within an agreed time frame. Additionally, an options contract yields greater flexibility on selling before the pre-scheduled time.
These days, digital gold is shifting the culture. As little as a gram of gold, investors can mature their gold virtually, later convert it into tangible gold once desired. Hassle-free, right? Last, the all-time popular goes to… gold jewelry. A precious item, perhaps limited-edition memorabilia, the twinkle never fools to bewitch your soul. Worth knowing, jewelers in India even offer monthly-installed gold investment schemes. Gold investing mechanisms also differ between countries, so the next time you hunt gold, remember to preview some facts behind them.
Gold throughout History
Gold has shone as a nonpareil commodity as old as time. Dates back to when gold served as a medium for spiritual practices and jewelry. Later on, Spain’s attempt to monopolize gold from the West and East Indies until the 17th century made a massive contribution to their national economic stability. Spaniards were able to hoard approximately $4 billion of gold bullion, driving British men to conquer Spanish sailships stockpiling bullions. Furthermore, the California Gold Rush that began in 1848 also steered thousands of people to find their new path of wealth, mining gold to over 300 tons in merely 7 years. Even in Europe and United States, the gold exchange standard in the 1800s established the value of a country’s currency. Therefore, gold has proven to stand the test of time.
Still, gold holds victory amidst wars and invasions. When stock markets fall bleak, gold prices surge wildly in turn. During Iran’s 1970s uprising, gold prices peaked up to 126%. Two decades afterward, the 911 attack in the U.S. also induced a price influx. The year 2014 saw again spiking prices following the ISIS attack. Back in August 2020, Covid-19’s impact on the world market turmoil pushed historic heights to 2074.88. None can deny that gold prevails to be everybody’s catch in unprecedented times.
Is it really a safe haven, any other choices?
What is a safe haven, anyways? According to Investopedia, a safe haven instrument is a type of investment whose value is expected to retain or increase during hard times or market fluctuation. At this time, investors will spend their money on safe-haven assets to limit their probability of losses. Compared to other investments, gold investment is considered to have a good price movement stability over time.
In response to the increasing severity of the Russia–Ukraine war, gold prices in stock markets have remained liquid, occasionally running peaks and valleys daily, whilst news about rising numbers of Ukraine refugees resumes. Taking opportunity of this circumstance, investors retreated from the less lucrative commodities and wave hello to gold instruments. Thus, gold is celebrated for its sustainable dignity among opportunists.
Figure 2: The increasing price movement of gold from time to time
Source: goldprice.org, 2022
Apart from gold, defensive stocks also act as a safe haven asset. Corporate Finance Institute (CFI) stated that defensive stock shows a steady performance regardless of the country’s economic condition, resulting in higher chances for constant dividend payment and share price. Such examples include utilities, healthcare, biotechnology, and consumer goods companies.
Benefits of investing gold
Figure 3: Gold instrument as a safe haven asset
Source: worldfinancereview.com, 2020
When it comes to investment, there is one crucial thing you need to bear in mind. That is, inflation. The International Monetary Fund defined inflation as an increasing rate of prices, while its value is decreasing within a certain period. With its outstanding performance, gold is a proven asset that will reduce your risk of inflation by a huge margin. Besides, gold remains an ultimate weapon against disaster. Many investors will invest their money in gold considering its stability, notwithstanding the kind of uncertainty — political, financial, or economical issues. In fact, when a crisis occurs, people tend to invest in gold, lifting the price higher and higher. Therefore, every time an emergency situation rings in, you can rely on your gold stocks for their good liquidity, easy accessibility, as well as convenience to sell. Imagine you sinking in a dreadful state, financially unprepared, and all you had is real estate investment. Bitter but true, it is hard to sell, so what comes next?
How to start your investment in gold?
Firstly, you need to choose either physical gold or gold stocks you want to have. If you are deciding to invest in gold stocks, first, download their stock trading apps to buy, keep or sell stocks. Otherwise, physical gold would be a good option if you want to own tangible gold directly, either in the shape of a coin or bar. This type can be purchased through an authorized dealer or gold factory. Remember to note that the gold you buy is real gold, not a mixture or an imitation version. Surely, every type of investment comes with its own advantages and disadvantages. It all depends on individual preferences and no right answers exist to that. In the end, gold investment is always worth your effort, time, money, and pain. So, are you ready to begin your investment journey in gold instruments? Let us know in the comment below!
Written By: Rosella Veltin & Calista Narta
Sources:
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