Is investing in gold bars worth it? Does the investment you make today in this precious metal bear any promise of being valuable in the future? What should motivate you to even consider whipping out your credit card and writing that check to purchase gold bars? Well, by the end of this article, you’ll have the answers to these questions, so if you want to find out, you should definitely read on to find out more.
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Brief background history and information about gold
Gold has been viewed as a valuable commodity for many centuries. Throughout all recorded and unrecorded history, this precious metal has been utilized as a currency, as well as a symbol of wealth. In some sociocultural settings, it has also been viewed as a symbol of power. Archeologists have come across gold buried alongside remains that date as early as 4500 B.C.E.
This very long-standing value proves that gold is indeed a stable asset and one that doesn’t lose its attractiveness over time. Gold has so far proved to be a safe investment, often recovering its value very fast through the global economic downturns. Generally, its price often moves in the opposite direction as the stock market and economy swings.
Whenever investor confidence falls, the prices of gold often rise, as a significant number of investors look for safe places to put the cash that they pull out of the market. Gold has proven to be a perfect haven in times of inflation, owing to the fact that it retains its value much better than any other paper asset, whose value may climb, but record a significant drop in value.
What investing in gold entails
The first thing you should know when investing in gold is that it is not the same as purchasing stocks and bonds. With a gold investment, you take physical possession of your gold bullion or coins. Bullion is simply gold in bar form, that has a stamp on it. The stamp on the gold bullion usually shows the purity level as well as the amount of gold in that piece of precious metal. The value of gold bullion or coins comes from the content of gold in the piece in question and can change throughout the day.
Investors usually purchase bullion and coins from:
- Brokerage firms
- The U.S. Mint (it has been producing gold coins and bullion for investment since 1986)
Besides buying gold bullion and coins, investors can make their money by purchasing:
- Stock from gold mining companies
- Gold futures contracts
- Gold focuses ETFs – investors who buy gold-backed ETFs usually purchase the shares of a given trust’s ownership in gold, and they don’t have a claim to the physical gold.
The price movements of gold
Investors should begin by analyzing the prices of gold, moreso the spot price ( what the gold can be purchased or sold for at the time of analysis). The spot price of gold is usually quoted per the following weight denominations:
For instance, the spot prices of gold at the time of writing (September 23, 2021), are:
- Price per ounce – $1775
- Per Gram – $57.07
- Per Kilo – $57066.25
An analysis of gold prices will reveal to you that gold prices shot up by a significant figure in the 2000s. In 2008, the prices ranges between $720 and $1000 (per ounce). The poor performance of the global economy was accompanied by the increase of gold to more than $1800 in 2011, as a result of the increase in demand from nervous investors.
By April 2020, the prices of gold went down slightly, from where they were almost one decade earlier, by they continued to do well, even in the middle of the economic downturn.
The same thing was experienced in towards the end of the 1970s. After the increase in the price of gold in the ‘70s, this precious metal spent the next two decades declining in value up to about 2000, when it started to increase in value.
During the pandemic crisis, the demand for gold went up, along with its prices. Whereas it is hard to predict the direction the prices of gold will take as we continue recovering from the pandemic, one thing is certain- whenever the global economy is doing poorly, the value of gold is most likely going to shoot upwards.
What form of gold is the best for you?
This entirely depends on what you are out to achieve by investing in gold. As we have already seen, you can either invest in physical gold, or you can take up the gold paper asset options. If you decide to go with the physical gold bullion and coins, they must be stored in a secure depository.
Investing in physical gold/gold bars and coins gives you the best security when it comes to global economic crises, as well as other forms of instability (e.g. political instability). If you’re a prospective investor who is looking for higher capital gains, then you might want to have a look at what gold stocks, ETFs, and futures have to offer. These paper assets have the potential to bring in higher returns, but they also come with one downside – they move with the stock market and are significantly affected by economic swings. This means that they are not the best hedge against risks.
Even with the ETF options that purport to offer the diversification, one’s portfolio is never truly diversified if they still own other paper assets. If you already own other paper assets and would like to invest in gold, then the best option would be to purchase physical gold since its prices move in the opposite direction of the stock market.
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I hope you have enjoyed this article in which we were trying to figure out whether it is worth it to think of investing in gold bars. If you have any questions, you can drop them in the comments section so that I can get back to you right away. You can also share your thoughts on gold investments so that other readers can view your thoughts.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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