Is Gold a Good Investment

We will get strong reactions from both the pro- and anti-camps whenever we discuss gold investment. Each camp will have very strong reasons to support their position on gold investment.

The question is not really gold. A good investment depends on your personal preferences.

Gold investment is the best option for someone who likes to ignore the latest business news and research and dissect economic and monetary policies.

Is gold a good investment? These are the characteristics that make passive investment possible

Gold has three distinct attributes that make it great for passive investors.

Increasing the Purchasing Power Parity over Time

Due to its limited availability, it does not lose its purchasing power. This means that the real cost of producing gold is rising as we get it from less accessible places. The purchasing power of gold will only increase in the future.

Universally Accepted Value Store

This is why central banks will keep a part of their gold reserves. It is the only store that has universal acceptance. It is universally accepted and not affected by government mismanagement.

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Safe Haven

When there is a crisis, you always see massive inflows of gold. It doesn’t really matter what type of crisis it might be. It shoots through the roof during geo-political tensions. It can also be seen charging during economic or health crises.

This is because all fiat currencies are worthless. It is simply an IOU that promises to pay out when presented. Its value is therefore based on the trust that the issuer will honor its promises.

However, people would prefer to have something of substance value, since their confidence in fiat currencies drops during the crisis.

It will rise to the sky every time there is a crisis. In a short amount of time, it can reach a maximum of a few hundred per cent.

Upon resolution of the crisis, you will see that it returns to its steady increase path.

Return on Investment in Gold

Based on historical data, the compounded rate for return for gold is 7.7% per year. This is compared to your bank cash deposits which pay a meager 1-2%. With that rate of return, you can’t keep up with inflation.

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You can earn higher returns by investing in the stock exchange, but that requires more effort on your part. For me, the passive nature of it is what I enjoy. I can just keep buying and forgetting about it without worrying about what happens to my wealth in case of a crisis.

How to Start Investing In Gold

Dollar cost averaging is a method that allows you to use this principle. You purchase a set amount of gold at fixed intervals. You could buy 50g in bars or coins every month, or every quarter. This will allow you to build up your position over the years. This will help to even out fluctuations in the price of your gold over a long time.

You can get higher returns by buying more at lower prices.

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However, physical bullion can be dangerous if it is not stored properly. Storing it at home can lead to theft, fire, and burglary. It will also be charged if it is kept in a bank safe deposit. This is something to keep in mind when investing in physical bullion.

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