Why Own Gold Bars in Your Investment Portfolio
Gold has long been regarded as a prized and unique commodity throughout history. Gold can serve as a financial safety net during times of geopolitical and macroeconomic turmoil because of its role as a global store of wealth.
Hedge Against Inflation
Because gold's price rises in response to rising living costs, it's historically been a great inflation hedge. When inflation was rampant, gold prices soared and the stock market plummeted, providing investors with a golden opportunity. This is due to the fact that when fiat currency loses purchasing power due to inflation, gold's price rises along with the rest of the market.
Deflationary Safety Measures
Deflation is when prices fall as a result of sluggish economic activity and high levels of debt. Gold's relative purchasing power increased during the Great Depression, while other prices fell dramatically. People chose to hoard cash, and gold and gold currency were the safest places to keep cash.
A Proven Record of Appreciation
Gold's worth has remained constant over time, unlike other assets like paper currency or coins. As a coin, gold is easy to work with because it doesn't rust and can be melted over a regular flame. Gold absorbs light because its atoms are heavier and its electrons travel more quickly. It was only via the use of Einstein's theory of relativity that this procedure could be fully understood.
Gold is Both Liquid and Portable
Another reason why gold is a good investment is that it's easy to sell and portable.
Gold is a very tradable commodity. A gold Eagle is instantly recognizable by virtually any bullion trader in the globe, and they'll gladly pay you for it. You can offer it to a coin dealer in your neighborhood, a private individual, or an online business. In either case, the item can be exchanged for cash or other goods.
When compared to selling a stock in your brokerage account, the process takes about three working days shorter. After that, you can have the money in your bank account or have a check addressed to you. The sale of other kinds of collectibles, such artwork, may be more difficult, have a smaller consumer base, and require a larger commission fee.
Because of its high liquidity, gold can actually be carried around with you everywhere you go. You can also buy gold in its "have gold/will travel" version if you're worried about carrying it across borders. Gold may be converted to cash simply and is portable.
Having a Diversified Investment Portfolio
Gold has a historically low connection to equities and other financial instruments, making it an ideal investment for those looking to diversify their portfolios. This has been demonstrated in the recent past:
- The 1970s were excellent for gold, but bad for stocks.
- Gold had a terrible decade in the 1980s and 1990s, but equities had a great decade.
- In 2008, stock prices plummeted due to a shift in consumer preferences toward gold.
Gold Is Simple To Keep Safe
Physical gold raises the question of how much it costs to store. Professional storage, on the other hand, does come at a cost, but vaulting costs are generally cheap. Also, a tiny storage fee is nothing compared to the hassles and costs of, example, purchasing a home. Just keep your gold in a safe place until you need it. You won't have to worry about missed rent payments, toilet repairs, or intricate tax concerns.
Remember that gold has a high intrinsic value. In other words, it has a lot of punch for its size. You have the option of carrying $50,000 in gold about with you in your pocket or keeping it locked away in a safe deposit box at home. A safe deposit box stocked with gold is more valuable than a bank vault filled with dollar cash at any price above $1,200/ounce.
Gold is in High Demand
Gold demand is primarily driven by the jewelry industry, which accounts for around 50% of total demand. For the remaining 40%, there is a physical investment in gold somewhere, whether it is in the form of coins or gold bars. (Bullion is a gold bar or coin bearing the weight and purity of the metal it contains.) The difference between this and numismatic coins is that demand for a certain sort of coin trades based on that rather than the amount of gold it contains.) Individuals, central banks, and exchange-traded funds (ETFs) are all sources of physical gold investors. Gold is frequently referred to as a "safe-haven" investment because of its perceived safety. If paper money suddenly lost all of its value, the global economy would be forced to rely on something else to keep trade moving. It's for this reason, among others, that investors prefer to drive the price of gold higher when the financial markets are chaotic.
As a result of gold's electrical conductivity, industry continues to be a major buyer of the precious metal for applications such as dentistry, heat shields, and technological gadgets.
Only Purchase Pure Gold
Gold bars of investment quality should have a purity of at least 99.5%. Otherwise, it's just any kind of metal alloy (typically silver or copper) that allows for smelting. Gold bullion investors should only acquire bars bearing the name of the producer, weight, and purity (typically indicated as 99.99% or above) stamped on the face of the coin or bar's packaging. In addition to the Perth Mint and Valcambi, other well-known mints make gold bars.
Be Familiar With Bars and Coins
Even though gold in all its forms like bars has a great monetary worth, not all gold is created equal. Investors who want to add a physical product that monitors the price of gold may want to steer clear of gold coins from an investment standpoint. These coins frequently have eye-catching designs, are historically significant, and contain less gold than standard bullion coins. However, their numismatic worth makes them more expensive.
Gold coins are more expensive, and their value might also be skewed by the fact that they are more expensive. While the U.S. Mint's American Eagle coin contains 91.67% gold, it is more expensive than plain gold bars due to its collector's value. Some investors prefer collectible gold bars, while others prefer plain gold bars since they may be held for a longer period of time and converted to cash with the least effort.
Purchase Gold in Amounts That Can Be Worked With
When purchasing gold bars, prospective buyers should keep the simplicity of liquidating the bars in mind.
It's easier to sell 10 one-ounce bars of gold than it is to sell one 10-ounce bar if the gold is selling for $1,400 per ounce and an investor has $14,000 to acquire gold bullion. There will be no problem selling the single-ounce bars, but it may be more difficult to sell the 10-ounce bar rapidly.
In contrast, because one-gram gold bars are so small, some investors choose to save up for larger ones.
Beware of Scams
To learn more about the reputation of a gold seller, prospective buyers of gold bars should consult websites like the Better Business Bureau and Ripoff Report. Gold sellers that are trustworthy are obligated by law to disclose all transaction costs up front.
The same goes for buyers in the United States who plan to purchase their gold from a vendor in another country. Even if the gold bars are genuine, sellers may charge high fees, and customers may have trouble clearing the gold through customs, depending on the amount purchased.
A Word of Advice
Gold is regarded as one of the world's most valuable metals and should be included in any investor's diverse investment portfolio as a valuable commodity. When the value of paper investments, such as stocks and bonds, falls, the price of gold rises. As a hedge against inflation and currency devaluation, gold's price has always maintained its worth.