Why Invest In Gold?

Why Should We Invest In Gold?

People around the world are becoming increasingly aware of the importance of investing in gold to protect their wealth.

When times are good and there is an air of confidence in the economy and the political climate most people prefer to invest in stocks and bonds.

However as soon as the tide turns and there are uncertainties around they tend to turn to the safe haven of gold.

What Are The Benefits of Investing In Gold?

• Wealth Protection

The more fragile the economy and the political climate, the more attractive gold becomes to investors. Although it can be expensive initially to buy gold, many view it as an essential investment for wealth protection.

Gold is not affected by changes in the economy or in any industry or business. It has proven itself historically to increase in value over time.

At the time of the economic crash of 2008 the price of gold was around $850/oz.

During the recent world health crisis it took an upwards trend, from around $1500/oz to $2000/oz, setting a new all time high price along the way. This is a perfect example of why buying gold to protect your wealth is a smart decision.

• Safer Than Currencies

It is a fact that gold can overpower currencies too. The Eastern part of the world in particular views gold as a very important asset and emerging countries like India and China are increasing their gold reserves and reducing their dependency on the US dollar.

It’s not an exaggeration to say that these countries are investing in gold heavily at the moment because between them they have consumed a high percentage of the world’s gold purchases over the past few years.

In the past few decades, the real values of most currencies have fallen considerably whereas gold has not experienced such a downfall. In fact while most currencies have fallen in value, the value of gold has shot up.

• Intrinsic Value

One of the many benefits of gold is that it has intrinsic value. Gold has to be mined, it cannot be manufactured and it is a scarce commodity. Compare that to paper currencies that can be (and are being) printed at will and to which there is no longer true value attached, just trust.

Is Gold Bullion Safer Than Cash?

• Protection Against Inflation

Inflation is the enemy of paper currencies even though ironically it is the continual printing of money that causes inflation. This is exactly why countries such as China and India plus billionaires and multi millionaires all over the world are trading dollars for gold right now.

• Protection Against Implications Of Quantitative Easing (QE)

Such are the times we are living in that the governments of many countries have lost control of their printing presses.

The United States is a prime example. Since President Nixon decided to move away from the gold standard in 1971 and start printing paper money which wasn’t backed up by its gold equivalent in the nation’s reserves, the US National debt has increased from $414 billion in 1971 to over $34 trillion in 2024.

• The Purchasing Power of Gold

The purchasing power of gold will always be high even if paper money becomes worthless.

• Liquidity

A further benefit of gold is its liquidity. Having gold in your portfolio gives you quick access to cash should you need it at any time. The same cannot be said of other forms of investment such as real estate, stocks and bonds.

The Reasons Why Top Analysts Are Bullish About The Prospects for Gold in 2024

How To Buy Gold

Despite the very strong case for investing in gold, I always recommend that inexperienced investors should tread carefully and do ample research before they take the plunge and buy gold. Does that mean that it’s risky to invest in gold? Yes and No…

Yes – because there are unscrupulous dealers around plus there are fakes and forgeries when it comes to certain gold coins and gold bars. No – if you do your homework, research what type of gold is safest to buy, and you only buy from reputable, trustworthy sources.

When Should I Invest In Gold?

My advice, based on many years of experience of working with precious metals, is that investing in gold should be a long term decision. It is not the right investment for people who are looking for quick gains or for clearing their existing debts.

Although the price of gold has always increased historically the ride upwards hasn’t been smooth and there have always been short to medium term ups and downs along the way.

If you take a short term view you might win and you might lose. If you take a long term view you are much more likely to win.

The longer gold is retained, the more its value will increase. Gold is a relatively scarce metal and it is indestructible and portable.

Should I Invest In Gold or Stocks?

There is a good case for investing in both. It is pretty universally accepted that a person’s investment portfolio should be a combination of high risk better returns and low risk and less return type of investments.

Investing In Gold Stocks.

Including gold in your portfolio will not only enable its diversification but also maintain stability. So when the market drops and you suffer losses on stocks, having gold in your portfolio will act as a hedge against these setbacks. This is because gold has a negative correlation with other assets such as treasury bills, stocks and bonds.

Gold thus acts as a solid measure of safety. Many financial experts nowadays recommend that you should include gold in your portfolio. This will help to safeguard it and to protect your wealth.

Why Invest In Gold Coins?

When planning your purchase of gold you should be aware that some forms give you more liquidity than others. I always recommend that buying gold coins as opposed to gold bars is the better option for maximum liquidity.

This is because you can buy gold coins in smaller denominations. It is easier to sell a number of gold coins as opposed to one gold bar of the same total value because you could sell the coins to more than one buyer. I have written in more detail about this here:

The Case For Buying Gold Coins.

Is a Gold IRA a Good Investment?

Another way of leveraging gold to protect your wealth is to include gold in your IRA (Individual Retirement Account).

A precious metal retirement plan can reduce the volatility of your retirement portfolio. Including gold (or silver) can help make the safety and profitability of your retirement portfolio much more attainable.

Gold IRAs also offer the added benefit of enabling you to invest in gold in a very tax effective way.

> Gold IRAs – Frequently Asked Questions

Benefits of Gold Investment – Conclusion

Geopolitical uncertainties and the reckless actions of Central Banks worldwide to continually print more money is putting the wealth of everyone at risk.

Wealthy individuals as well as many countries’ governments are already taking steps to protect themselves by investing in gold and there is no reason why everyday folk cannot do the same.

Nowadays the individual investor can easily leverage gold to protect his or her own wealth and that of their families.

Here’s my summary of why investing in gold makes sense…

• Gold is universally recognized as a financial safe haven because it has what is technically referred to as a ‘negative correlation’ with traditional forms of investment such as bonds, stocks and Treasury Bills and with the value of the US dollar. When these fall in value so the value of gold rises. It always has.

• As economic and geopolitical volatility increases, the more gold goes up in value. Naturally the price of gold will be subject to short term fluctuations but the overall trend will be up all the time there is uncertainty. This is why investing in gold for long term growth makes much more sense than doing so for short term profit.

• Gold also acts as a hedge against inflation. As inflation goes up, so does the value of gold. So when you own gold you are actually protecting your buying power.

• Gold is a rare commodity, but not too rare. It’s actually the relative rarity of any asset that gives it its value. If it was easy to mine or produce gold its value would diminish because there would then be plentiful supply of it. It can’t be manufactured at will in the same way that paper money can be.

• Gold has intrinsic value. This means that it has always been perceived to be of value and because of that there will always be a demand for it. For want of a better term, it will always be desired because of its ‘goldness’.

• Gold is durable. It won’t rust, tarnish or erode. This means that it doesn’t have a short shelf life so you can hold onto it indefinitely with no risk that it will lose value just because it’s getting older.

• Gold is one of the most liquid assets around. You can use gold coins as a form of currency or for bartering. Wherever you happen to be its value will always be the same. You can always sell gold very quickly should your need arise.

About the Author: Doug Young

Doug is a highly experienced professional and widely trusted authority in financial investing, commodity trading, and precious metals. With over 20 years of expertise, he helps others make informed decisions by sharing a combination of personal experience, extensive knowledge and meticulously researched information on gold IRAs, precious metals investing and retirement planning. He regularly writes news items on these topics. He has considerable experience of evaluating Gold IRA and Precious Metals Companies, gained over a period spanning more than a decade.

See full bio

More reading: Types of Gold Investment