Thanks to its value and durability, gold has been a source of fascination and desire for ages. In the face of financial uncertainty and market fluctuations, many people ask: is gold the best way to protect your money? Is investing in this precious metal a smart choice?
Historical outline
History presents a compelling case for gold as a secure investment. From ancient times to the present day, it has consistently been regarded as a precious metal that safeguards the wealth of its owner. Despite various economic cycles and political transformations, gold has consistently maintained its value over the years.
Gold played a crucial role in the 1970s when it served as the foundation of the global currency system. Standard currency units were pegged to a specific amount of gold, and central banks aimed to maintain reserves of this mineral (a practice that continues to this day). The departure from this model only began after the significant economic crash of 1929, which necessitated an increase in domestic demand and the stimulation of economic growth.
Another significant milestone for gold occurred with President Nixon’s decision in 1971 to suspend convertibility. Following this event, the price of gold began to rise rapidly, altering the perception of the role of this precious metal. Combined with inflationary pressures, this led people to view gold as a reliable means of preserving their savings.
A safe harbour
Gold is not directly tied to any financial system or monetary policy, making it impervious to market fluctuations and manipulations. Consequently, it provides effective protection against inflation, financial market downturns, and other unforeseen factors.
Due to its inherent stability and significant value, gold is frequently seen as an alternative investment to more conventional options like stocks or bonds. Investing in gold can serve as a valuable means of diversifying one’s investment portfolio.
Where and what to buy?
The most common method of investing in gold is purchasing it from a bank or mint in the form of gold bars or gold bullion coins. The primary advantage of these forms is that they predominantly consist of gold, without collector value or aesthetic qualities, making them suitable for long-term investments.
When buying gold, it is important to select reputable producers such as Valcambi, Heraeus, Umicore, or Perth Mint. Coins should be kept in satisfactory condition, and gold bars should come with a special certified package to validate their authenticity.
If physical ownership of gold is not desired, an alternative is to trade gold as one would trade securities. This can be done through a brokerage account or a Forex account.
Another option for gold investment is purchasing units of an ETF fund, particularly for mid- or long-term investments. These funds acquire bullion coins and bars and can provide them in physical form upon the investor’s request.
Lastly, CFD futures contracts for gold offer another investment option. With these contracts, profits are derived from fluctuations in the gold price, and most positions are opened and closed within the same day.
