Gold stands among the oldest forms of wealth known to humanity. The earliest gold coin emerged in Persia around 500 BC, and its allure endures more than 2,500 years later. Revered as a reliable store of value, gold’s near-indestructibility ensures that nearly all of the gold ever extracted has survived, existing in various forms today.
The gold market’s overall worth is projected to exceed US$11 trillion, comprising gold bullion such as bars and coins, jewelry, and a minor portion utilized in products like electronics.
In today’s world, it might feel unusual to place gold alongside other investment options such as shares, bonds, or digital currencies. This piece delves into whether gold investment is simply an outdated concept from the past or if it remains a relevant choice in contemporary asset management.
Why Invest in Gold?
The primary appeal of gold lies in its ability to preserve wealth. With a history that spans millennia, it boasts an impressive legacy. Society recognizes and relies upon it. Presenting a gold item to anyone, regardless of their location, conveys its inherent worth.
Whether or not you’ve encountered a gold ingot or a genuine gold coin, there’s a good chance you’ve come across or worn gold jewelry.
This explains why many view gold as an effective protection against rising prices. It’s anticipated to maintain its worth compared to other everyday purchases. Furthermore, it’s regarded by numerous investors as a ‘safe haven’ asset. During times of stock market downturns, people frequently turn to gold for stability.
As of 2022, the trend continues as expected. In spite of significant declines in global stock markets, gold has managed to increase in value this year.
Should You Invest in Gold?
So, the question remains: is investing in gold a wise choice? A number of financial experts would contend that it isn’t. Although gold has a long history, it doesn’t hold the inherent value found in various other investment options. It may be aesthetically pleasing and has some specific industrial applications, but ultimately, its worth stems solely from our collective societal consensus on its value.
Gold does not generate any income, and the sole method to profit from it is by selling it to another person for a higher price than your purchase cost.
The essential takeaway is that gold might serve a role in your investment strategy, though it should primarily be viewed as a secondary or unconventional asset. Avoid liquidating all your ETFs to invest everything in gold unless you’re preparing a doomsday shelter and getting ready for apocalyptic scenarios.
How to Invest in Gold?
If you’re looking to invest in gold, you have the traditional options such as coins, jewelry, or bullion. While this approach may appear simple, there are security concerns to address. Common homeowners’ insurance may not provide coverage for gold, acquiring a safe can be costly, and renting a bank’s safety deposit box also comes with its own expenses.
If you’re looking to avoid investing in tangible gold, there are contemporary options available. Exchange-Traded Funds (ETFs) are not limited to equities and fixed income; there are ETFs specifically designed for gold or futures related to gold. Depending on their composition, these funds might not possess actual gold but are designed to mirror its market price through various financial tools.
Putting money into gold mining equities offers an alternative method to gain insight into gold price movements. Firms primarily focused on generating income through gold extraction will inherently experience fluctuations in alignment with gold prices.
Gold vs the Stock Market
Putting money into gold may offer unique advantages in a portfolio, but for long-term wealth accumulation, it pales in comparison to investing in stocks. The Dow Jones Industrial Average, one of America’s longest-standing indices, includes 30 prominent blue-chip corporations.
Since 1915, it has achieved an impressive cumulative return of approximately 60,000%, while gold has only yielded a little over 10,000%. Therefore, feel free to consider gold on your own, but don’t allow its shiny appeal to overshadow the true investment opportunities that are more significant.