Why Invest in Gold?

Throughout history, gold has been associated with wealth and prosperity, serving as a liquid store of value that was frequently traded. Although the gold standard is no longer in use, it remains an important asset for investors seeking to diversify their portfolios and safeguard their wealth outside of the banking system. In the UK, the uncertainty surrounding Brexit has driven demand for gold, with the price of gold rising by 22.3% per ounce since 2016. This has led to an increase in worldwide gold demand, with central banks purchasing more gold in 2018 than in any other year for the past 50 years. In 2019, demand remained strong, with China and other countries continuing to add to their gold reserves. With the economic impact of Covid-19, there has been a surge in consumer purchases of gold bullion as a safe haven asset. Investing in actual gold can be a reasonable way to diversify a portfolio and mitigate risk during times of stock market volatility and economic uncertainty.

How can I Invest in Gold?

There are numerous methods to incorporate gold and other precious metals into your investment portfolio. Traditionally, gold was primarily available in the form of coins, bars, or jewelry. However, the emergence of digital trading platforms has streamlined access to precious metal markets.

Gold coins are offered in various sizes and designs. Established dealers like The Royal Mint allow individuals to purchase coins singly or in tubes containing multiple pieces. With a range of sizes available, smaller coins may present a more accessible option due to their lower acquisition costs compared to larger counterparts. Additionally, UK denomination gold bullion coins enjoy capital gains tax (CGT) exemption, which can be advantageous for investors with sizable portfolios.

Gold Bars – Investors also have the option of acquiring gold bars. While large bars, often depicted in media, are available, their associated expenses may be prohibitive for many. Nevertheless, for those favoring bars over coins, a variety of sizes and designs are available, with smaller 1g or 5g bars offering an appealing price point, particularly for novice investors.

However, unlike less tangible investments such as stocks and shares, physical coins and bars require secure storage to safeguard against theft or damage. Some investors opt to store them in a safe at home, while others prefer custodial storage, such as at The Royal Mint’s vault. Custodial storage incurs a storage fee, although this may be more cost-effective than purchasing and insuring a personal safe at home. Ultimately, the choice depends on individual circumstances and preferences.

Excellent Way to Build and Protect Wealth

Investing in gold is considered a reliable way to preserve and increase wealth, and it is a popular option for diversifying investment portfolios. While the price of gold may fluctuate in the short term, it generally maintains its value over longer periods, providing a hedge against the depreciation of fiat currency. For investors looking to make significant gold investments, purchasing British gold coins can be a tax-efficient option, as they are exempt from VAT and Capital Gains Tax (CGT).

“Crisis Commodity” In The Times of Adversity

Gold is widely recognized as a reliable investment option during times of financial and geopolitical uncertainty, earning it the nickname “crisis commodity.” It tends to outperform other investments as global tensions rise and trust in governments deteriorates. Not owning gold means placing complete trust in the government to keep the economy afloat. 

Concerns about global currency debasement have prompted many people to consider investing in tangible assets such as gold, which can see significant gains in value if a significant currency debasement occurs. Investing in physical gold can provide protection against banking risks and diversify wealth distribution by keeping assets outside the financial system. 

Unlike fiat currency, gold’s value is not determined by governments, which rely solely on laws to back their currencies that have no intrinsic value.

Increasing demand vs the Limited Supply

As geopolitical tensions and economic uncertainties continue to rise in Europe and other parts of the world, investors are turning towards gold as a safe haven asset. During the first quarter of 2019, gold demand in countries like India, Turkey, and Iran increased, and in the UK, there was a 58 percent rise in gold bullion demand leading up to the original Brexit deadline in March.

Gold is a highly valuable and scarce precious metal. If all of the gold that has ever been mined was melted down and refined, it would form a block with a volume of 8,549 cubic meters. To put that into perspective, the cube would measure approximately 20.4 meters on each side. The metal’s worth is further reinforced by its rarity, which was initially valued for its colour, malleability, and anti-corrosive properties. A study shows that copper is found in the Earth’s crust at approximately 55 parts per million, while gold is only present at 0.0038 parts per million, underscoring the natural scarcity of this valuable metal.

Is gold a high-risk investment?

Gold is typically regarded as a relatively low-risk investment, particularly over the medium to long term. Its track record includes preserving value and serving as a safeguard against inflation and market turbulence. Short-term price fluctuations present the primary risks, yet gold has consistently exhibited stability over the long haul.