Gold has been recognized as a precious metal and a store of value for thousands of years, and the ownership of physical gold continues to be viewed as a safe option against the vagaries of an unpredictable economic situation, including stock market crashes and, in some parts of the world, rampant inflation. But investing in gold isn’t for everybody, this guide helps you to answer the question “Why Should I Buy Gold?”.
Historic Store of Wealth
The beauty and durability of gold are factors that lend gold its status as a store of wealth, as can be seen for example in the golden coffin of the ancient Egyptian Pharaoh Tutankhamun, which, after millennia still exhibits its original lustre. Gold has been used as a basis for trade from as far back as the Bronze Age, and the oldest known gold coin is the Lystra Lion, minted in Asia Minor from an alloy of gold and silver over 2,600 years ago.
Gold does not corrode and so the total amount of gold extracted throughout history is mostly still in existence, although much of it is held in museums, national treasuries and private collections. Even so, gold tends to maintain its value over time and is always considered a wise investment.
High Value per Size
Because gold has such high value per weight and size, small quantities representing large investments can be inconspicuously transported and easily stored in a secure place, such as in a concealed wall safe, or a safe deposit box.
Tax Free Investment
Modern gold coins are viewed by many governments as a form of legal tender and often do not attract sales tax, capital gains tax or value added tax, whereas purchasing or selling gold in the form of jewellery will, in most cases, attract one or more of these forms of taxation.
Safer than Shares, Bonds and Property
As was experienced as recently as the mid-2000’s, shares on the stock exchange and even banking accounts might outperform the price of gold in the short term, but are subject to market corrections which may have devastating impacts on one’s savings. In the wake of these, interest rates have been extremely low and share market growth modest. The same is true of the property market, which is subject to bubbles and busts, with millions being shaved off property values overnight. In addition, property taxes are a low-hanging fruit for governments as they need to increase their revenue, with a result that the costs of buying and maintaining property will continue to increase, relative to its value.
High yield bonds may hold the promise of good returns on an investment, but the higher the promised yield, the higher the risk of not receiving any return! With more and more countries struggling with sovereign debt and worsening balance of payment situations, even government bonds might be risky – think Greece, for example, offering 9%. In addition, bonds can have long term fixed durations, depriving you of the flexibility of being able to redirect your investment if you are not satisfied with the issuer’s performance.
As global political uncertainties drive people to seek safe havens for their wealth, gold investment will increasingly be considered the best option. This will tend to drive the price of the precious metal upwards as demand increases, so the earlier one invests in gold, the better.
Gold Bullion and Coins
In modern times, investors buy gold mostly in the form of coins and bullion. The term bullion is used to describe bars or ingots of precious metals including silver, gold and platinum, and it can be stored privately or traded on commodity markets.
Gold coins can be collected in either numismatic form, or as modern gold bullion coins. Numismatic gold coins are collectibles in that their value has a premium over the spot price of gold, based on their antiquity, rarity, quality and beauty. These coins should only be purchased if one is well versed in the complexities of numismatics. Modern gold bullion coins are minted annually in many countries in limited quantities and sold at a slight premium over the spot price of gold.
Gold coins and bullion bars are the easiest means of obtaining legal possession and ownership of the precious metal, and while some people may have the luxury of doing so as a hobby, for anyone considering a stable long term investment, ownership of physical gold is an essential component of their portfolio. Whether, as a newcomer to gold investment, you invest in gold coins or gold bars, bear in mind that either option is better than a paper investment when you are contemplating “Why Should I Buy Gold?”.