Why invest in gold?
If you are not familiar with gold as an investment, it might seem a bit absurd that people invest in lumps of metal for financial reasons!
Store of Value
Gold is one of the oldest currencies in the world. If you look at the purchasing power of gold over time, you will see an ounce of gold will purchase roughly the same now as it did 300 years ago. Conversely, if you look at the purchasing power of some major national currencies over the same period, you will find that the buying power of these currencies has severely decreased. The reasoning behind this is that paper money is not a true reflection of wealth. You may have healthy savings in a particular currency, but if that currency becomes devalued, your wealth would no longer have the same purchasing power it once did, owing to inflation. Many people who invest in gold do so believing that it is the only way to hold their savings in a safe manner.
Another popular reason people invest in physical gold is to diversify their investment portfolio and limit their exposure to unforeseen financial dangers. This can be successful as gold tends to react very differently to a lot of mainstream, more modern investments such as equities, property and bonds. Gold is traditionally viewed as a ‘safe haven in hard times’, and as such tends to rise when financial market related investments perform poorly. This type of negative correlation is effective for limiting damage to your investments, as it acts as a form of insurance. For example, if your stocks had significantly decreased in value, it is quite likely that your gold investment would increase in value over the same time period.
Security against economical recession
You may have noticed that the more frequently the word ‘recession’ is mentioned in the newspapers, the more articles on gold investment appear! This emanates from gold being seen as a ‘safe haven’ investment, as it is usually one of the few markets that increase in an underperforming economy.
Globally accepted. Global Value
A great advantage of gold is that it gives you portable wealth which you can exchange for goods and services around the world, avoiding dependency on a single currency. As gold has a high density and a high value, it does not take up much space and can be easily transported in relatively small amounts, in the form of gold coins or gold bars. It has a universally recognised value and can be exchanged for a cash value in many places around the world.
Why invest in Physical Gold?
There are different types of gold investment and various ways to speculate on the gold price including gold exchange traded funds (ETF’s), allocated and unallocated gold certificates and gold linked investment funds. Bucknor and Grandels trade in physical gold, which of course means you purchase a specific weight of gold, in the form of widely recognised investment grade gold Bullion. Owning physical gold is the essence of gold investment, just as having physical ownership over your own wealth gives you security over your investment. This means you have no dependence on a third party when it comes to the safety of your investment. Owning physical gold avoids reliance on another person or organisation to store, allocate or pay out your savings and is the only way to truly realise the potential of gold as a physical, transportable, reliable and tradable store of personal wealth. Physical gold is ideally suited to investors who are looking for a mid to long term investment and who wish to secure part of their savings or investment portfolio against unforeseen or unpredictable changes in the economic climate. It suits someone who has a number of more mainstream investments and is looking to diversify their portfolio with an asset that will perform in a radically different manner, acting as a safeguard against more speculative investments. It also tends to appeal to those who have a very negative view of the economic outlook! People who, for whatever reason, have lost faith in banks and other large financial institutions, currencies or even the economy as a whole. Unlike most other forms of investment, your savings are not reliant on the asset value of your bank. The performance of gold historically is not reliant on strong economic growth and is not directly exposed to the performance of any particular currency. Another underlying feature is the fact that gold will always have a value, and although this value can both increase and decrease, it will never run the risk of becoming completely worthless, unlike some investments.