In this article, I give you my list of the top 14 ways how gold protects property. Investing in gold is different from other forms of investment. The goal of any investment is to return the money in an increased amount after a certain period of time.
Investing in gold is not a classic investment, but hedging (protection) from unfavorable economic trends. The same does not prevent a negative phenomenon from happening, but insofar as it happens, the consequences are minimal.
Investing in investment gold is an insurance policy for financial capital. Also, it serves to reduce the currency risks of the current currency. This type of investment protects the current currency from inflation, deflation, disappearance, or replacement of the current currency.
Gold has always been a security and since the establishment of the international financial system, it has been the main currency, not only for trading but also for keeping the foreign exchange reserves of central banks.
An Example Of How Investment In Gold Is Profitable
If we compare gold with wheat, it is noticed that wheat is a luxury only in case of hunger. Wheat can be easily damaged and is not resistant and does not maintain its value like gold. Diamonds are certainly durable, stable in value, and beautiful, but they cannot be divided at will and are not similar.
Gold can be arbitrarily divided, melted down, and reconnected. Furthermore, it is available in limited quantities and has been known throughout the world for centuries.
In times of economic and political instability, investors traditionally resort to the so-called safe haven for their capital, so they include precious metals, ie gold, in their investment portfolio.
The recommendation of investment advisors is to keep 5 to 10 percent of assets in gold in times of stable markets, while with the advent of the crisis, that percentage should increase to as much as 30% of the investment portfolio.
1. GOLD IS THE BEST GUARDIAN OF VALUES
The fact that gold has served for thousands of years as a measure for the expression and preservation of value. Namely, gold has passed the test of time and has not lost its significance even in times of crises, wars, industrial and technological revolutions.
2. GOLD DOES NOT LOSE ON VALUE DUE TO THE INFLUENCE OF INFLATION
Although gold is a commodity, the value of which may be lower or higher due to global market developments at a given moment, inflation that devalues money does not have a negative impact on gold. Due to the increased inflation rate, investors are resorting to gold in order to preserve the value of assets.
3. THROUGHOUT HISTORY, GOLD HAS ALWAYS BEEN CONSIDERED MONEY
Most economic theorists today consider gold not money in the narrow sense of the word, but its suitability to be a measure of valuation at any time can bring it back to the world of money as the most competent and stable means of calculating the value of goods and services.
4. THE LARGEST BUYERS OF GOLD IN THE WORLD ARE CENTRAL BANKS, FOR THE NEEDS OF GOLD RESERVES
This fact speaks in favor of how important this metal is for maintaining economic stability in the long run and how much the world’s largest economies rely on this source of stability.
5. OWN PHYSICAL GOLD, NOT JUST GOLD IN SECURITIES
Just owning gold in a physical sense can be a one hundred percent guarantee that that gold really does exist and that it is your property. There is a lot of speculation and controversy about where the gold traded on the stock exchange is located, where it is produced and who controls it, and even if it even exists.
6. CURRENCY WAR POSITIVELY AFFECTS THE PRICE OF GOLD
The currency war that is currently erupting globally is affecting the rise in the price of yellow metal. Central banks are trying to artificially bring down the value of their own currencies in all possible ways and thus boost the export potential of their economies and thus reduce the foreign trade deficit, ie increase the surplus, which is the case with China.
7. GOLD IS SUITABLE FOR RISK DIVERSIFICATION
Even the biggest critics of gold as an investment, agree that every investor should keep 5% to 10% of their assets in precious metals, so as not to lose their entire fortune in the event of major stock market crashes or the collapse of other investments.
If the economy is healthy and there is no crisis insight, this percentage can be as low as 5%, but in cases of likely crises and increased risk of the falling value of shares, assets, or cash, the percentage of precious metals in the investment portfolio should be significantly bigger. Namely, if there is a major financial crisis, even a small percentage of gold, whose value skyrockets in such a situation, can compensate the investor for a competent loss.
8. GOLD RETAINS VALUE DURING DEFLATION
The positive characteristic of gold in relation to inflation is known, which we wrote about earlier. However, even in times of deflationary economic crises, when securities and real estate fall in value, gold does not lose it. It grows along with the value of money or at worst stagnates.
During the Great Depression in the 1930s (which has the character of a deflationary crisis), there were major stock market crashes, and the value of gold did not change. True, in the USA it was formally fixed for the dollar, but its price did not fall in the rest of the world or on the black market. The best example of the relationship between gold and deflation is the first half of 2016 when despite deflationary pressures, gold gained 30%.
9. POSSESSION OF GOLD IN PHYSICAL FORM
Electronic money in the Bank or government bonds is essentially just digital numbers, behind which is someone’s guarantee and a promise that one day and under certain conditions it will be paid to you. Gold is a tangible thing that you can hold in your hands, feel its power, and freely decide on its disposal and purpose.
The importance of owning gold will only come to light after central banks abolish cash and force citizens to use only electronic money. In this case, one of the main alternatives for maintaining privacy when paying will be – gold.
10. THE PRICE OF GOLD IS CURRENTLY MANIPULATED
In recent years, a number of pieces of evidence have been presented that financial institutions in the service of individual governments are manipulating the price of gold, among other things in order to maintain the stability of the dollar as the most important and represented reserve currency in the world.
Over 60% of the world’s foreign exchange reserves are parked in USD. The fate of the USA is tied to the fate of the dollar, and that is why it is extremely important for them that the dollar stays where it is. However, this game may not last long.
11. GOLD HAS LONG-TERM GROWING – BULLISH TREND
Throughout history, the price of gold has had its ups and downs, but in the long run, the price of gold is constantly rising and defying inflation.
For example, for 10 grams of gold, during the 19th century, the value of goods and services, and especially money, could be significantly lower than today.
To illustrate, we will compare the Swiss franc as one of the most stable currencies in the world that has never been devalued and gold. Namely, 10 Swiss francs in the seventies of the nineteenth century, was worth 3.23 grams of gold with a purity of 0,900.
Today, less than a quarter of a gram of gold can be bought for the same 10 francs. Serbian dinars are not worth discussing. Of course, many attribute low yield to gold, ie the fact that it does not bring profit in the true sense of the word and does not pay dividends or interest.
It is true that investing in shares of companies can earn much more in the short or long term, but keep in mind that such an investment is extremely risky, and also the investor can lose much or all. With gold, the risk is minimized. Gold is an ideal investment for those who want to know before they invest something – what they lose and what they gain.
12. LITTLE GOLD IS IN THE POSSESSION OF INDIVIDUALS
If you ask your acquaintances or colleagues how much investment gold they own or how much they actually know about precious metals, you will realize that it is very little or nothing at all.
Insufficient information and legal restrictions on the possession and disposal of precious metals in many countries affect the fact that people are not aware of the importance of owning this type of property. When the price jumps for one of the many reasons listed and gold fever or mass hysteria reigns, it will be too late to buy under more or less favorable conditions.
13. GOLD LASTS FOREVER
If you decide to invest in something like an electronic device, a car, or clothes, you know at the beginning that the item only lasts for a certain period of time. even items that are the subject of collecting, such as wine, cigars, antiques, painting plane trees, or watches, have a shelf life and after a certain period, either decay or need restoration.
While gold is a metal that does not change, does not oxidize, does not require maintenance, and is able to preserve its physical characteristics even in extreme conditions.
14. GOLD IS A UNIVERSAL INSURANCE POLICY
With a certain amount of gold in you, you can feel financially secure and cared for in any country in the world.