Investing in Gold
For thousands of years, gold has been regarded as a representation of wealth and prosperity.
It has demonstrated its ability to retain its value over generations, unlike paper currency, coins, and various other assets.
Gold serves as a reliable means to transfer and safeguard wealth from one generation to the next.
Central banks and nations often hold gold reserves, ensuring the preservation of value as a guarantee to fulfill promises made to depositors or to stabilize a currency.
With over eight thousand metric tons, the United States possesses the largest gold reserves globally.
The Uses of Gold
Throughout history, the primary driver of gold demand has been its value in jewelry, accounting for approximately one to two-thirds of the total demand.
However, demand dynamics can shift periodically, especially during times of uncertainty, such as the onset of the Russia-Ukraine war, leading to increased investment in gold.
This higher investment activity causes inflated gold prices.
As of March 2022, costs reached around $2,000 per troy ounce, and despite a slight dip in October 2022, gold prices have remained elevated.
Projections suggest that the average gold price will not start declining until 2025.
The Reasons for Investing in Gold
Over the course of history, gold has proven to be an excellent hedge against global inflation due to its tendency to increase in value during periods of rising living costs.
This stability extends to economic downturns, where gold prices often do not suffer in the same way as shares and other volatile financial assets.
Consequently, gold is widely recognized as a safe haven asset in times of crisis.
Retail investors have various avenues to invest in gold.
One option is owning physical gold, although this may present challenges regarding storage and typically involves a high buy-in price.
Alternatively, individuals can invest in investment funds such as mutual funds or ETFs that possess a quantity of gold, effectively granting the investor a share in the physical gold held by the fund.
Gold funds rank at the top of the list for the largest precious metals ETFs, with some managing billions of U.S. dollars’ worth of gold. Lastly, investing in shares of gold mining companies is also an option.
While it can be argued that investing in stocks negates some of the advantages of investing in gold, it is worth noting that gold mining stocks experienced growth during the pandemic.
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