Gold has been considered an important and valuable asset for almost all of human history. Already in ancient times people realized that if the amount of material used as a means of payment is limited, its value increases. In this article, we’ll discuss how profitable it is to invest in gold today, where to buy gold, whether the global economic situation affects investment trends, and what advice experienced investors can give to beginners.
In the twentieth century, gold had the status of almost the most important currency in the world. Although no one paid directly with gold, most European countries used the gold standard. Under this standard, any monetary unit can be exchanged for an equivalent amount of gold if both parties are interested in the exchange.
Interesting information
The “gold standard” was actively used in settlements between countries: the exchange rate was determined as the ratio of these currencies to a unit weight of gold.
In 1944, the Bretton Woods Agreement was signed, under which countries stopped using the gold standard. The value of the precious metal for settlement was set in US dollars – $35 per troy ounce.
The exchange rates of the other national currencies of the countries participating in the agreement were also pegged to the dollar. At the same time, the exchange rate was managed: fluctuations were kept within 1%, but managed devaluations and revaluations were also allowed.
These would be interesting facts about gold from history, but let’s take a closer look at where to buy gold.
Where to buy gold?
As mentioned, gold is an independent benchmark and therefore protects against inflation, currency fluctuations, changes in economic systems, etc. However, there are several types of gold investments. Don’t think that it is just about buying coins or jewelry. Alternatives to investing in gold include buying shares in mining companies or exchange-traded funds (ETFs), or trading options and futures contracts. Different investment options are suitable for each investor and economic period.
Physical gold
Investing in physical gold can be challenging for investors who are used to online trading in stocks and bonds. When it comes to physical gold, you’ll typically deal with traders outside of traditional brokerages and will likely have to pay for storage and obtain insurance for your investment. The three main options for investing in physical gold are bars, coins and jewelry.
When investing in gold bars, you should also not forget about insurance and choosing a reliable dealer. Usually, this type of investment is quite expensive and demanding. Gold bars are available in sizes up to 400 ounces. The most popular brick sizes are 1 and 10 ounces. It is better to store such assets in a paid vault. When buying bars, you should time your purchase well as most dealers update their prices based on current spot prices. Keep a close eye on trends, as you can both make and lose money on large investments. There are many physical showrooms where you can buy gold in different shapes. In the Czech local market, we would like to mention such a gold dealer as Bassergold. On the website, you can choose the product you like, reserve it and pick it up at a branch in Prague or Ostrava.
Buying shares of gold miners
Investing in shares of companies that mine, process and sell gold is much easier than buying physical gold. Since it involves buying shares of gold mining companies, you can only invest through your brokerage account. This type of investment is no different from the normal stock market practices.
Futures and options trading
Of all the ways to invest in gold, trading futures or options contracts is the riskiest. Futures and options are derivatives, which means that their value is entirely dependent on the price of the underlying asset. A futures contract is an agreement to buy or sell a security at a set price on a specific date regardless of current market conditions. An option contract is an agreement that gives you the option to buy or sell a security if it reaches a certain price on a certain date. People who choose to invest in gold using options or futures contracts should actively monitor quotes to make sure that the investment does not lose its value.
Invest in gold ETFs
Gold ETFs are investment funds whose shares are traded on an exchange and whose prices reflect fluctuations in the value of gold on the market. There are many different types of gold funds. In this investment, you do not buy the gold itself, but only the paper associated with the physical gold. This means that you don’t have to worry about storing and protecting the gold from theft. However, it is important to remember that the value of ETFs may not fully match the market price of gold and these investments may not perform as well as physical gold. To become a shareholder in such a fund, you must enter into a contract with a broker.
Buying digital gold
Digital gold is a way to accumulate pure gold in batches at any time and anywhere, even with minimal investment. It allows you to buy gold without worrying about its purity, safety and storage. Every gram of digigold that an individual purchases is backed by real 24k physical gold. This physical gold is put away in an assigned vault of the dealer who acts as its custodian. If you sell a portion of it, the exact amount will be deducted from the store.
Also read: BITmarkets review
Selling gold – where to sell your gold
We don’t just buy gold, we also sell it. Take a look at the information below.
List of places where you can sell your gold
- bank;
- auctions;
- individuals;
- saving banks;
- pawnbrokers;
- gold buying centres;
- jewellers.
In any case, it remains a very important question whether it is profitable to invest in gold at all. We can’t leave this topic out and have gathered information for you in the next section.
Don’t miss.
Is it worth buying investment gold
Countries are holding gold reserves to ease inflation. Is it worth buying investment gold for the average citizen and what benefits can investing in gold bring?
To analyse the current market position of gold, it is useful to look at the changes in its price in the past. Let’s look at the last 20 years:
If you invested in gold in 2007, your investment in gold would have almost quadrupled by 2011. During that period, the value of a troy ounce of gold rose from $500 to $1,800.
Even if you invested in this asset in late 2015, when the price of an ounce was around $1,050, you could sell it for $2,070 in August 2020. Your investment in gold would almost double.
The price of gold per gram hit $66 at the beginning of 2022, and then hovered between $52 and $55 during the fall of 2022. Starting in November 2022, it rises and is currently around $62 in January 2023. At the current exchange rate of CZK 22 to USD 1, the value of 1 gram of gold converted into Czech currency is approximately CZK 1 350.
From this it can be concluded that the price of gold is regularly rising and has positive investment prospects. This precious metal is not much affected by inflation, so this type of investment can be considered reliable. Although gold can be as volatile as stocks in the short term, it holds its value well in the long term. Therefore, gold should be invested in for the long term.
Gold is used in many areas of our lives. Each market sector performs best at different stages of the global economic cycle. This diversity of demand and the self-balancing nature of the market reinforce the advantages of gold as an investment asset. Average annual demand for gold: ~4100 tonnes (approximately USD 166 billion).
Also read: InvestaGO review
See below for the main reasons to invest in precious metals:
Demand. Governments and large corporations actually demand gold reserves. This precious metal is not subject to corrosion, so it cannot be damaged. Moreover, the number of deposits is constantly decreasing, which means that gold reserves can run out. It is much more profitable to stock up now, while deposits still exist. The leaders in terms of reserves for 2022 are India and China.
Profitability. From an investment perspective, gold is an ambiguous instrument. It is a tangible asset that does not generate profits or dividends like stocks. At the same time, gold has historically become more expensive, especially in crisis situations.
Inflation protection. When inflation rises, cash depreciates – the same amount of money can buy fewer and fewer goods over time. Major economic shocks, such as the crisis in Germany in the 1920s or in Venezuela in recent years, have caused inflation of around 4,000%. In such situations, it is impossible to predict what will happen to the currency. Gold can save you from the prospect of losing everything.
5 biggest holders gold (foxbussines.com)
Liquidity. Although trading physical gold on exchanges is relatively uncommon, in the modern world, investments in shares of gold mining companies are more popular. Trading in these shares is always quick and painless and there are always buyers and sellers of mining company securities.
A few words in conclusion
So if you are looking for a way to diversify your investment portfolio, gold is a good choice. While you can’t expect big returns from investing in gold, if you want to protect the value of your savings from inflation, you’re definitely on the right track.
This article is also available in other languages: Czech, Slovak
Liquidity. Although trading physical gold on exchanges is relatively uncommon, in the modern world, investments in shares of gold mining companies are more popular. Trading in these shares is always quick and painless and there are always buyers and sellers of mining company securities.
A few words in conclusion
So if you are looking for a way to diversify your investment portfolio, gold is a good choice. While you can’t expect big returns from investing in gold, if you want to protect the value of your savings from inflation, you’re definitely on the right track.
This article is also available in other languages: Czech, Slovak
