There is an old saying that goes, "Gold is the money of kings, silver is the money of lords, barter is the money of peasants - but debt is the money of slaves."
Although people in the 21st century no longer use gold as a real currency, gold has always been associated as a safe haven for those who have money. However, even putting this aside, there are many good reasons why you should consider adding some gold-based investments to your portfolio.
How gold works as a commodity
Gold's appeal dates back to ancient times, where it was used for jewelry as well as to mint early coins. Combined with the fact that gold was both rare and difficult to extract from the ground, it made sense why early civilizations favored this yellow metal.
Gold prices, like most other commodities, are determined by supply and demand, with existing gold mines providing fresh gold ore to be used later for industrial and commercial purposes.
About 50% of total gold demand comes from the jewelry industry in Thailand, but unlike many other types of commodities, a large portion of total gold demand comes from the physical purchase of gold used in bullion, coins, medals, etc.
Another major buyer of gold in recent years has been various central banks, including the central banks of Russia and China. Central bank purchases alone account for about 10% of global annual demand.
How gold can protect your wealth
If you are anticipating a major economic downturn, keeping your cash in your bank account and away from investments may not be the best strategy. Your wealth would be protected from a decline if the stock market collapses, but it won't do much else. In Thailand it is very popular to invest your savings with different brokers (good example is เติม เงิน Exness). Coupled with the possibility of a rise in inflation, your money can easily lose its value.
The price of gold, on the other hand, has proven its worth in tough economic times. In most economic collapses over the past few decades, gold has not only outperformed the economy in a bear market, but in many cases it has accurately preceded a recession.
On the other hand, gold tends to struggle during bull markets
In the mid-1990s, gold prices struggled to stay afloat amid growing GDP and rising interest rates. More recently, gold prices have fallen in recent years after 2011 as the U.S. stock market returned to a bull market, with prices jumping above $1,500 per ounce only in recent months.
How to buy gold
There are few different ways you can invest in gold:
- Buying gold ETFs
- Buying actual gold bars or jewelry
- Investing in gold mining companies
- Trade gold via CFD
A much better way is to buy it from certified dealers. This can be in the form of bullion - gold bars or gold coins. These types of physical gold can be converted back into cash relatively easily when the price of gold changes. However, there are a couple of problems with this.
The first problem is finding a place to store the gold, whether it's in your basement, in a vault at your home, or in a third-party vault. The second problem, however, is that money tied up in buying gold cannot bring you any returns other than changes in the price of gold.
The last form of direct, though not physical, gold ownership is gold certificates. These allow you to buy gold without having to worry about physically storing it. However, since these certificates are usually issued by a few, mainly private issuers, these certificates are only as valid as the companies backing them.