Gold has the reputation of being particularly crisis-proof and therefore a safe investment even in troubled times. In the eyes of many investors, this is a sufficient argument for investing. But is gold also worthwhile for building wealth? What are the advantages and disadvantages of gold for investors? And how can investors even invest in gold?
GOLD INVESTMENT: THE SAFE HAVEN IN TIMES OF CRISIS
Even the ancient Romans regularly used gold as a means of payment. As such, the shiny precious metal has long since had its day, but has lost none of its fascination to this day. Because gold exudes great security – especially in times of political instability and unpredictable crises such as the 2008 financial crisis or the corona pandemic. When such global events are on the march, many investors withdraw their money from the exchanges and put it in gold instead. With the precious metal, they then receive a physical equivalent for their money.
Why investors act this way is simply related to the limited supply of gold. Because, unlike money that can simply be printed, the amount of gold is not inexhaustible. That is exactly what makes the precious metal so sought-after and supposedly crisis-proof. While cash and stocks can lose value in the event of a national bankruptcy or a company bankruptcy, the relative value of gold remains largely unaffected. In addition, gold is usually more stable in value when inflation threatens and is also accepted as a means of payment in an emergency.
GOOD TO KNOW: The price development of gold depends exclusively on the existing demand and the available supply. A well-known economic principle, but unlike many conventional commodities, gold cannot simply be reproduced when there is high demand. Since only supply and demand influence the performance, the gold price of an ounce is subject to strong fluctuations.
GOLD AS AN INVESTMENT: ADVANTAGES AND DISADVANTAGES AT A GLANCE
Anyone who fears a currency crash, wants to arm themselves against crises or just want to spread the personal investment risk can choose gold as an investmentthink. However, an investment in gold does not offer absolute security either. Because in addition to the advantages, gold as an investment also has some disadvantages. The main arguments against gold are the high costs, currency risks and price fluctuations and, last but not least, the lack of profitable interest and dividends. In addition, the new tax law presumably changes the taxation in gold trading. The draft of the federal government’s annual tax law provides that profits from the sale of gold papers are subject to the withholding tax in future. Even if they are kept for more than a year.
3 Advantages Of Gold As An Investment
- Gold is stable in value
- Gold is independent
- Gold is (still) tax-free
3 disadvantages of gold as an investment
- Gold does not provide interest and dividends
- Gold price carries the risk of loss
- Gold is expensive
CONCLUSION: GOLD INVESTMENT DOES NOT NECESSARILY PROMISE PROFITS
Due to the lack of interest and dividends, gold is not necessarily worthwhile as an individual investment for long-term wealth accumulation or for private retirement provision. Many investors therefore only use gold investments to add to their portfolio, which consists mainly of shares . How much exactly that should be depends not least on your risk appetite.
GOOD TO KNOW: The value of gold often moves in the opposite direction to stocks. In times of crisis it usually collapses less or even increases in some cases while stocks decline. A small addition of gold can therefore make the portfolio more resistant to fluctuations, but it may also affect the prospects for returns.
How can I invest in gold?
Anyone who is convinced that they will invest part of their assets in gold has basically various options.
- Physical gold investments: bars and coins
- Investing in Exchange Traded Gold: Funds and Stocks
The most popular way to invest your money in gold is to buy bars or coins. They can be purchased either from the bank, from coin dealers or on the Internet. But keep in mind that investment gold in the form of coins is associated with a comparatively high risk of theft and loss. The same problems exist with gold bars. Their advantage, however, is that they are available in larger denominations and have lower minting costs.
Nowadays, investors can also get into the gold market with special funds. So-called gold funds invest primarily in commodity companies such as gold mines and gain in value as soon as gold prices rise. As is usual with exchange-traded funds, however, investors have to expect high price fluctuations and the associated risk of loss. Investors can also invest in gold stocks, but here too, strong price fluctuations and thus losses are possible. In addition to funds and stocks, there is also the option of investing in gold ETFs. Find the right securities offer for every target .
Good to know: Fraudsters often lure people with seductive bait offers. So be on your guard and buy your gold only from renowned precious metal dealers or banks.