Gold, Silver & Diamonds as an Investment
Gold is a symbol of immortality and makes people dream.
For a long time, gold was used as a means of payment. All the gold mined on our planet so far would fit into a cube with an edge length of just over 20 meters. Today, owning gold is seen as a crisis-proof investment. Although gold does not yield interest or dividends, unlike other securities, it is an asset that is generally considered stable and a safe haven.
So what’s the deal with investing in gold? Why do precious metals have high volatility even though it is referred to as a safe haven? If you look at past performance over a longer period of time, you come to the conclusion that, contrary to belief, gold is anything but stable in value. Even according to the successful investor Warren Buffett, an investment in gold has never been a good deal.
Anyone who buys gold therefore hopes for future price increases, as gold does not generate any income.
Or, according to Warren Buffett:
Anyone who buys gold is hoping to find a dumber man who is willing to buy this unproductive metal at a higher price at a later point in time
Precious metals not only serve as a store of value but are also important industrial metals, which explains some of the volatility. At the same time, there are strong seasonal fluctuations in precious metal prices. An example is the wedding season in India from December to February. As a very important tradition, people there give each other golden gifts.
Unlike gold, the precious metal silver also plays a role for industry. Among other things, silver is used in electronic products such as cell phones, cars and numerous future technologies. Silver is also invaluable in soldering and alloying, batteries, dentistry, glass coatings, LED chips, medical technology, nuclear reactors, photography and photovoltaics, to list just a few examples.
If we look at the performance of gold from 2002 to 2012, we see that the price per troy ounce in USD rose from around USD 275 to around USD 1,800. In the past 10 years, the price of gold has tended to move sideways in a trading range of roughly USD 1,000 to USD 2,000. Once again, timing is crucial here.
Gold still serves as a store of value or value retention. Depending on the quantity and type of precious metal, it must be possible to store it, which is usually associated with costs. Here one can access old wisdoms and agree with the words of Andre Kostolany: Invest and put to sleep. After ten years, look to see what has happened. Gold can of course also be inherited and thus make the children or grandchildren happy.
Jewellery and coin collectors are just as much a part of this as security-oriented and wealthy individuals. Of course, central banks and governments also hold large amounts of gold reserves for security reasons.
UP TO ANNUAL R.O.I.
Gold, Silver & Diamonds
INTERESTS OR DIVIDENDS
RISK OF THEFT
INSURANCES & STORAGES
RISK OF EXPROPRIATION
The price of gold, like all tradable commodities, depends not only on seasonal patterns but also on the supply and demand situation. In addition, of course, stock market speculators and commodity promoters determine the prices here. These fluctuations are of course also used by traders to speculate on the gold price in the short term. Historically, volatility is higher for gold than for the stock market.
No one can say how long gold will still be needed as an investment. Digital currencies could soon overtake gold as a safe haven. The prices of gold, silver and other precious metals are subject to major fluctuations. Many industries have to hedge against such fluctuations with future options.
Warren Buffett once said that gold pays no dividends and no interest. That is also true, but precious metals have an intrinsic value and this correlates negatively with inflation. In times of ultra-expansive central banks that are drowning the world in a flood of money, gold is the only true measure of value.
Gold, silver and diamonds have had an unbroken attraction for many people for thousands of years. While this strengthens the importance of the metal, it can also lead to criminal behaviour by some individuals. Here, of course, security measures such as safes help. Still, physical gold ownership can lead to being robbed from the unexpected.
Warehousing, security services or safes are cost items to be mentioned here. In addition, insurance can be useful. Some selected companies have specialized in these security services and offer very sound solutions. Here one should build as a enthusiast of precious metals only on trustworthy recommendations.
Political and economic stability in the country of the precious metal investor is important here. If a legal ban on gold is decided by governments, one is very likely to lose his gold bars and gold coins. Even high value jewellery will then be confiscated by the government or you will receive minimal financial compensation. In many countries, gold ownership is indirectly controlled. Cash purchases are often only possible up to a small certain amount per year, which means that governments are usually aware of your ownership.
Gold, Silver & Diamonds
GOLD = MONEY
MOST GOLD INVESTMENTS CAN BE SOLD BY ANY TIME
TAX-FREE SALE IS POSSIBLE
Gold in particular has been used as a means of payment for thousands of years. It serves as a store of value and is also used as asset protection in times of crisis. In addition, precious metals have an automatically increasing intrinsic value, because the commodities on our planet are naturally limited.
Most precious metal investments or derivatives on the respective metals can be converted into cash very quickly and are therefore very flexible. Certainly, it is a little more complicated to sell ten gold bars than a ring or a certificate, which can be traded on a daily basis. Nevertheless, there are very good places to go to convert even large holdings of precious metals into cash.
Some Stock Exchange operators offer opportunities to trade gold without the need to physically own the metal. Nevertheless, the investor can cash out the investment in physical assets. In some countries, precious metal investments are tax-free after a certain speculation period.
A personal note
Despite some disadvantages that are not to be ignored, we still believe that physical gold should not go unnoticed as a certain hedge in any portfolio. No matter what happens, gold will most likely always be usable as a means of payment. However, it should be noted that it is not very advisable to exchange half a kilogram of gold for a loaf of bread. Therefore, it is important to pay attention to the denomination here. Many companies or refineries offer corresponding verified gram units, which can easily be used as a means of payment in extreme cases. At some airports or in heavily frequented places there are gold vending machines where you can exchange cash for minibars, e.g. 0.1g bars.
LINKS, PARTNER & PRODUCTS
In the following section, we would like to introduce partners, products and links to providers with whom we or trusted people have had good experiences and who offer sometimes unusual solutions.
From some of the companies listed here we receive a commission. AF-Intermediary is not allowed to give investment advice. All actions are your personal responsibility.
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