Why buy gold?
In times of economic uncertainty and instability, many investors are looking for low-risk ways to protect and grow their money. People have been using gold as a safe haven asset for years, but first time investors might ask themselves 'why buy gold?'
At BullionByPost we believe buying gold makes more sense than anything else. Confidence in the banking system has been irreparably damaged following the 2008 crisis, and people don't trust that their money is safe with people who already lost it once.
The UK economy, as well as that of the world at large, had recovered, but has once again suffered a major shock with the outbreak of the Covid-19 pandemic. Unprecedent amounts of money printing have saved stock markets from short-term damage, at the cost of potential inflation in the years ahead, and record levels of peace-time national debt.
Gold bullion is the ultimate insurance and, given its ability to maintain a high value, should be viewed as an essential part of everybody’s investment portfolio. Here are some of the many reasons why buying gold is a wise investment.
The ultimate insurance
Owning gold could well be the ultimate insurance for turbulent times. It’s an age old question which people have been asking for centuries – where is my money really safe? More and more people are now choosing the oldest answer: GOLD.
The UK and wider global economy are at risk from trillions of added money. Interest rates are at record lows, and inflation looks set to rise, eroding the value of savings kept in the bank. Living costs continue to increase while low wage growth and increasing unemployment keep earnings down.
This is where gold comes in. Gold offers about as much certainty as you can get, and bullion - unlike other investments - will always hold a value. Gold bullion is an effective way of hedging against other investments as its value tends to be particularly buoyant when other investments such as stocks and property are under-performing.
Gold can also be used effectively to insure you against other economic factors such as inflation and deflation, interest rates, stock market jitters and currency problems. Importantly, as a highly precious metal, gold's worth is recognised internationally, and is considered a valuable luxury no matter where you are in the world. An additional convenient, positive aspect is that gold bars and gold coins can be taken with you easily, wherever you go.
It is often said that there is never a bad time to own gold. It is a physical asset, a timeless asset, an asset that cannot be devalued in the way money can be by the government simply deciding to print more through Quantitative Easing. Even in the most extreme and unlikely scenario that the banking system should face collapse and paper money lose all its value, gold bullion, particularly small units of gold such as gold coins, could be used to buy and trade yourself out of trouble.
To protect your wealth
Since the crisis in 2008, people have paid more attention to their finances and are looking harder than ever for alternative methods of protecting the value of their money. Gold offers a long-term safe haven for those looking to protect and preserve the value of their wealth as it will always hold a significant value no matter what. Gold investment should be viewed primarily as a low-risk security asset for yourself and your family’s future.
The unpredictable nature of the UK economy and the Eurozone, especially since Brexit began, suggests further long-term strength and likely rises in the global gold price, but these potential profits should not be the main reason for investing in gold. Bullion should be viewed as a non-speculative, safe, long-term method of safeguarding your wealth. Owning gold offers a unique and interesting element to your portfolio, offering an opportunity to spread the risk from the uncertainty of other investments such as stocks and shares, property, and currencies, which may be under-performing.
To control part of your wealth
The physical ownership of gold bullion bars and coins gives investors the ultimate control over their wealth. Instead of trusting third parties and handing your money over to a fund manager, or even leaving it in the bank, holding your gold at home or in secure storage gives you true control, ownership and responsibility over your own future instead of relying on others to do so.
This control can only be achieved through owning physical gold bars and coins, not paper gold or electronic gold (ETFs). This control even extends to choosing how, where and when to release the value of part or all of the value of your investment. Hundreds of bullion dealers are willing to buy your gold instantly over the telephone. Investors can realise the value of the gold in just a few minutes and get a bank transfer or instant cash payment onsite the very same day.
Gold Performance – where next for gold?
The price of gold began rising sharply in August 2007. After the banking crisis in 2008-2009, gold continued to boom and peaked in 2011. During these four years the price of gold doubled, but following the peak in late 2011 trading and investment switched from bullish (keen) to bearish (hesitant). This is a common occurrence in the world of investment as the investors will deem an asset too expensive and lose interest, or spot an opportunity with something that is undervalued.
Gold's bear market hit the bottom at the end of 2015, and the gold price soared in 2016 spurred on by economic and political uncertainty caused by events such as the Brexit referendum result and Donald Trump's election. The price continued to rise into 2017 with tensions between the USA and North Korea over nuclear missile testing, but by the end of the year the Cryptocurrency bubble was stealing the limelight from gold, shortly followed by a stock market boom to welcome 2018 in. This bubble continued until March but at the start of June 2018, stock markets stalled, currencies grew more volatile, and gold prices climbed up once more, proving that you can't stay away from gold for too long. Continuing uncertainty over Brexit has seen the price of gold rising further still.
2020 saw new all-time highs for gold, as the Covid-19 pandemic swept across the globe, shutting down economies. Central banks have responded with trillion in fiscal stimulus, keeping stock markets afloat, but raising concerns over the long term sustainability of national debt levels and a possible return to austerity. The future of the global economy is far from certain, and inflation looks set to rise, providing further potential support for gold in the years ahead.
As with all investments, there are no guarantees trends will continue. Gold going up doesn't mean it will keep going up for months to come. By conducting your own research and keeping an eye on the news and current affairs you can learn about what triggers a rise or fall in the gold price and act accordingly with these developments. We also produce our yearly gold price forecasts, to help draw on the opinions of analysts and our own experience.
Buy gold primarily as a safeguard for the future, and secondly as a profitable investment. If you are of the belief the current economic difficulties will continue down the same road for some time to come, then the gold price is likely to remain high and continue to rise.
Demand for gold - Worldwide demand hits new heights
Another factor to consider is demand. With the world’s central banks increasing their gold reserves, and general demand in many countries higher than ever before, many experts predict that the metal will remain a highly valuable commodity for many years to come.
Figures released by the World Gold Council have shown a year-on-year increase in gold and silver demand; both for investors and for industrial purposes. For the former, it's about preserving wealth and diversifying their portfolios to get strong returns. For industry, we're seeing more and more gold and silver used in modern technology, whether it's smartphones, electric cars, or solar panels.
Gold investment is experiencing growing demand in China and India in particular. European countries including Germany, Switzerland, Turkey and France have also experienced record uplifts in consumer demand.
With both consumers and Central Banks in many of the world's most powerful economies buying unparalleled amounts of the precious metal, has there ever been a better time to buy gold?
Don’t make the mistake of thinking "I’m not rich enough to buy gold". In some countries like Germany, India and Russia, some of which experienced economic collapse within living memory, buying and owning gold is a very common way of protecting and preserving your wealth, and at BullionByPost we have a huge range of gold and silver starting at prices as low as £20 and going up to over £300,000.
It is advised everybody should own between 5% and 10% of their liquid wealth in gold bars and/or coins, whether you’re a person with some savings or a multi-millionaire. In either case acts as the ultimate guard against turbulent economic times.
Related Links: If you have any questions about gold bullion investment, please feel free to contact our knowledgeable and friendly team on 0121 634 8060 who will be happy to talk your through any queries you may have. Alternatively, you can email us at firstname.lastname@example.org and we will get back to you as soon as possible.
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