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Gold price currently in US Dollars – Gold Rate Today
Gold Price Chart
Why invest in gold? Main advantages
Although gold is no longer a primary form of currency in the developed world, it is still a popular investment for the following reasons:
- Liquidity. Physical gold gives you a fully liquid asset as it can be easily converted into cash anywhere in the world. The universality of gold has no rival.
- It maintains its value. Gold tends to maintain its value over time and to be more stable than other financial assets. For this reason, it is often considered a traditional ‘safe haven‘ to protect capital.
- Hedge against inflation. Gold increases in value when inflation takes hold. Since it sets its price in USD, any deterioration in the European currency will lead to a higher price of gold. As a result, gold will offer a more stable investment during times of inflation.
- Diversification. Adding different securities to our portfolio is an essential way to diversify and reduce the overall risk of our investments. Also, because gold often moves inversely with stock and currency values, it provides an especially effective way to diversify.
- Universally desired investment. Gold remains a universal commodity. Although countries sell their currency futures, Treasuries and other securities around the world, unlike gold, they are subject to the impact of so-called political uncertainty.
- Gold is used as an input in different products. Since this precious metal is used in the production of various products, including jewelry and electronics, there is a reliable demand that further stabilizes its price. Also, in times of increased demand, these markets can force the price of gold higher.
Disadvantages of investing in gold
However, all that glitters is not gold and the disadvantages of investing in gold are the following:
- Gold does not generate passive income. Other investments, such as stocks and bonds, can derive a portion of the value of passive income in the form of interest and dividends. However, the only return we can get from gold is when it increases in value and we decide to sell it.
- Gold can create a speculative bubble. When the economy is unstable, many people start investing in gold. Although our investment could lose value once investors change their minds and the price corrects itself.
- You need physical and secure storage. If we choose to buy real physical gold, we will not only need to store it, but we should also insure it. Otherwise, we would not be able to replace it if it is damaged or stolen.
- The purchase and sale of gold must be reflected in the income statement and will be taxed for its revaluation, in the same way that an exchange- traded fund or an ETF would do for the gains of heritage. On the other hand, when investing in gold bars we would be exempt from paying VAT, since it complies with the fiscal political regime of the European Union.
- The increases in the value of gold coincide with the devaluation of the local currency. Some economists argue that gold only increases in value when the euro devalues or inflation is strong.
When to invest in gold?
Typically, a good time to invest in gold is when inflation is expected to take hold and reduce the value of the national currency. The sooner we detect such dips, the more room we have for profit.
Leading indicators such as the stock market crash and political turmoil often imply a future devaluation of the country’s currency. Similarly, when the central bank announces that it is going to print more currency, it may be another indication that it is another time to invest in gold .
On the other hand, when the monetary value is strong and inflation is not expected any time soon, there is not much scope for the price of gold to rise. That being said, if there are expectations of increased demand from markets that require gold, such as jewelry and electronics, we will consider investing in gold to benefit from potential price pressure.
In practical terms, however, a passive buy and hold investment strategy may be best for the regular gold investor. Since economies tend to be cyclical, it’s best to buy when the price of gold goes down. This way, we won’t have to worry when others decide to buy and the price goes up.
How to invest in gold?
There are many different ways to invest in gold , choosing one or the other will depend on the modality that is most appropriate for our lifestyle and circumstances:
- Buy gold directly. We can acquire gold directly in the form of bars or coins. It is the most traditional way of investing in gold , although it misses more risk as it can be lost or even stolen. If we want to keep it safe, we will have to pay for specific insurance.
- Acquire shares in a company that is dedicated to the sale of gold. The second option is to buy shares in a company that produces gold such as gold miners. Although it is not a direct investment in gold, the value of the shares will be strongly correlated. At the same time, what happens to the gold mines will also have a direct impact on their value. There is also the possibility that by having gold they pay us dividends for the shares.
- Through gold futures contracts. We can invest in gold through financial derivatives specialized in gold investments such as call and put options.
- Investing in a gold ETF. An exchange-traded fund that specializes in the range of gold values. This diversification can minimize your risk somewhat.
Is it profitable to invest in gold?
Before investing in gold, we should know in depth what type of investment we are going to make and the value of gold at that moment. In addition, we will take into account exactly how much it will cost us to store and insure the physical gold. Do we know the tax differences between investing in ETFs (bullion), paper gold (mutual funds) or gold coins (mining companies)?
Finally, it should be noted that there are other factors that directly influence the profitability of investing in gold, such as the time of purchase and sale, especially if we do not acquire physical gold. Undoubtedly, knowing all those details of the investment will guide us to finally decide if it is profitable to invest in gold or not.
*The gold price data above is provided by Zyla Labs. The company obtains asset price data from a variety of sources. This gold price represents the average of spot gold prices across several leading metal exchanges. Prices are updated every business day.