A sense of security around the gold price has long made this precious metal the go-to investment if you want a safe haven for your wealth. Here’s a look at how to invest in gold, and its pros and cons for those navigating modern markets.
Investing in gold is a popular choice for all sorts of different people, a fact that has remained true across the centuries. There are a few reasons for this but they all have one thing in common – security. For some, buying gold is a way to hedge their investments, offsetting one against the other to cover themselves as far as possible against significant losses. Frequently, gold is used to offset risk against currency investments; it’s an effective protection against the dangers of inflation. When stock markets really flounder and a full crash is imminent, gold tends to hold its value, often rising quickly in price as investors scramble for a safe haven in the storm. Gold is a finite substance with multiple industrial uses and innate. Its growing value makes it an excellent option for direct investment. As an example of how significantly gold can increase in value, in the five years between 2002 and 2007 it doubled in price, going from $347.20 to $833.75 an ounce.
When it comes to how you should buy gold, a good rule of thumb is that it shouldn’t be bought alone as a single commodity by individual investors. Instead, it should represent part of a portfolio of diverse investments. That’s because gold’s value is volatile. The undulating price makes it a bad choice as a single investment route. It’s relatively easy to buy physical gold coins from specialist investors, although for most people investing in gold exchange-traded funds is a more practical choice.
The Pros
Many people perceive gold as an insurance investment. And while insurance against inflation may immediately string to mind, the valuable mineral is also considered a good insurance policy against disaster, whether man-made or natural. When cities are destroyed, or economies fall, gold will power through. For some, it’s gold’s sheer simplicity as an investment choice that gives it real appeal. There’s no ploughing through property portfolios or painstakingly reading up on stocks – with gold you know what you’re getting. On a related point, those who invest in gold often cite its tangibility as a reason for doing so. While many modern investments, specifically in cryptocurrencies, exist only in the ether and have a nebulous quality, gold is a solid, real world investment.
The Cons
Perhaps the most significant downside to an investment in gold are the low capital gains. While gold will most likely rise in value, it won’t rise by as large an amount as property or shares. Additionally, it’s both tricky to buy and sell, and difficult to store. When buying or selling real gold (as oppose to gold exchange-traded funds), dealers will take their cut. And, if you do buy gold, the question of where to keep it securely must be answered.
With its sense of glamour and long history as an inflation beating commodity, gold will probably always enjoy a high profile across the markets. And, in 2019, the outlook for gold is good, if ultimately unpredictable.
