Is it worth buying physical gold, or is it better to have securities tied to gold?

Physical gold, Yes or NO?

In recent months, gold has been a frequently discussed topic in almost all television programs focused on investing. Well, it wasn’t always like that. For example, in the period between 2014 and 2018, gold was hardly mentioned as a good investment. A large number of investment experts even described the yellow metal as an experience that has no place in the investment portfolio.

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The reason for this change of attitudes must be found in the alternation of economic cycles. At a time when the economy is growing, there is general optimism and enthusiasm for revenues. In stock markets, no one usually wants to admit that nothing grows in the sky and every wild ride ends in a fall called a recession. And at a time when the possibility of a recession is just being talked about, the question arises as to where to save money safely. Then gold always comes to the fore, which has been proven for thousands of years as a safe store of value.

While all paper currencies in human history have gradually lost value, gold has persisted and held its purchasing power. There are many comparisons of property that could be bought for an ounce of gold ten years ago, a hundred years ago, or during the Roman Empire. For example, when comparing the purchasing power of gold over the last 30 years, we find that it has increased significantly. While in 1992 it was possible to get the amount for which you could buy a car for 750 g of gold, today you can buy a car of two higher class classes from the same manufacturer for the same amount of gold. History clearly shows us that the ownership of gold protects its owner from the devaluation of the currency, which we now call inflation.

Buying gold is suddenly more attractive

At the end of 2019, this was exactly the moment when there was talk of a possible economic recession. In 2020, the covid crisis began, coupled with great concern for the future of the world economy. The price of gold on the world market reacted almost immediately to a sharp rise. The year 2022 adds to the economic stagnation another factor supporting the price of yellow metal and that is geopolitical instability. Russia’s invasion of Ukraine puts further pressure on price growth.

The highly publicized situation on the border with Ukraine adds another dimension to gold in the eyes of the public. Precious metal is no longer perceived not only as an investment, but also as a safeguard for unexpected crisis situations. A gold bar or coin is a highly concentrated wealth that is easily transferable, anonymous and liquid in any part of the world without counterparty risk. You will receive these benefits only if you own physical investment gold. On the other hand, ownership of securities linked to the price of gold only functions as a net investment with counterparty risk.

Today, the purchase of investment gold is possible in companies that specialize in precious metals and also in some banks as part of private banking services. We recommend choosing suppliers who contractually guarantee repurchase at a price that is not lower than the market.

Investment for at least 15 years

The composition of the portfolio must be considered before purchasing. From a price point of view, the rule is that you pay less for a higher weight ingot per gram than for a lower weight ingot. However, in the event of a sale, it pays to have the portfolio divided into several ingots or coins, because you have the option to sell only part of the assets stored in gold if necessary.

From a security point of view, of course, the origin of gold is important. We recommend buying products from reputable gold producers. In our market there are, for example, refineries Argor-Heraeus, Heraeus, PAMP, Valcambi, etc. The quality is also guaranteed by well-known state mints such as the Austrian Mint – Münze Österreich or the Czech Mint.

The size, shape and minting of the coins are clearly defined by the manufacturers. Investment ingots are always marked with the manufacturer’s mark, identification number and weight data.

The price of yellow metal is influenced by many factors and this creates very high volatility. Therefore, the key parameter for deciding on the purchase of investment gold is clearly the investment horizon, which should not be shorter than 15 years.

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