It’s been quite some time since I posted an article. Well, I was caught up with many things in the past few months, but now most of it is sorted and I back to writing.
It feels great to be interacting with all you folks. It is such an amazing feeling. I hope you all are doing great.
Today I want to talk to you about Gold.
It is about considering gold as an investment. I know that many of you are aware about a variety of investment options- Stocks,Mutual funds,Government issued securities, real estate and what not.
So “why gold”?, you may ask. Sure, that is an interesting question but I believe I have some concrete arguments to persuade all of you to seriously consider investing gold.
So get ready jot down notes: Here I present my top 10 reasons why you should seriously consider investing in gold
Gold is a noble metal that has been valued, since ages by various civilisations from around the world.
People from various cultures could identify the intrinsic value of gold and hence, it was adopted as currency by many ancient civilisations.
It also signalled wealth and power, that is the reason why kings and autocrats were so obsessed with this metal.
Not only the ancient civilisations, even the forefathers of the United States understood the value of gold and hence adopted the ‘GOLD STANDARD’ in the early eighteenth century.
This article is more focussed on the the investment part, but surely, gold has a special place in almost all the cultures of this planet and learning about it only strengthens my argument as to why investment in gold makes sense.
It has been valued ever since it’s discovery. In fact, Gold finds special mention in the Bible and many other religious texts as well.
If you want to learn more about the rich history associated with this noble metal- you can this link by clicking here.
It’s scarce !
Gold is a scarce metal. The one thing that separates it from paper money is that it is limited in supply and hence theoretically it cannot loose value.
Before you guys jump on me and say, “But gold prices fluctuate!”, let me explain myself in a bit more detail.
Some amount of fluctuation occur in gold because of global supply and demand cycles, but since gold reserves are limited and because of the fact it is carrying heavy value as an industrial metal, aside from its intrinsic value that appealed civilisations since ages, Gold is going carry great value even one hundred years from now!
you can refer the chart here from gold.org showing the world gold production sites.
For details you can visit it’s website here.
Surely, I cannot say the same about many silicon – valley startups!
In fact many dot-com companies that kicked off with great expectations fell on the ground and are nowhere to be seen today.
I am not going to deny the super-success that Google and Amazon tasted, but a majority of startups during the dot-com bubble have actually failed.
It is not that I am making this up. you can go through this article from investopedia. and decide for yourself.
In fact finding a Google or Amazon from a crowd of hundred’s of startup’s is not an easy task.
So folks, if you are not all that great at value investing, consider creating some space in your portfolio for gold!
Mines are running dry!
Gold production has already peaked and mines are running dry.
It is turning more and more expensive to locate and profitably extract gold from the earth.
As I said previously, gold cannot be created at will like paper currency.
Unless of course, we develop some technology to create elements! That would certainly be great, science has yet not figured out how to create elements as stable as gold.
Some man-made elements do exists, but creating gold in a lab is certainly impossible for now.
So spare some of your hard earned money to accumulate this divine asset and diversify your portfolio for the good.
You ca learn about the global gold reserves by jumping to the article here.
I would use you to go through this interactive infographic at visual-capitalist
As per Visual-capitalist, we may run out of gold as soon as 2030-2040!
Let us try to accumulate enough that keeps us in the SAFE – ZONE.
As I said in the beginning, Gold has always been associated with great value by almost all the civilisations around the world.
In fact, in dollar terms, Gold has appreciated significantly in the past twenty years.
if the dot-com period (1995-2005) is evaluated gold has increased by almost 30% in value.
And from 2005-2012 it appreciate by almost 200%.
Surely it went through some corrections, but the significant appreciation in value is something that cannot be ignored.
You can check out historic gold prices since 1792 – here.
If Gold is compared with S&P 500 (refer chart below) , Gold has outperformed stocks at many occasions, specially during recessions and depressions.
The chart below shows ratio of S&P 500 to gold plotted over a period of 80 years.
A ratio below 1 indicates stronger gold with respect to SP 500.
Gold appeared especially valuable during the turmoil period of the Great Depression (1939) and subsequent recessions in 1970’s and 2008-2010.
Hedge agaginst inflation
Gold’s purchasing power increases with inflation. As the prices of goods soar during inflation, paper money’s significance diminishes as it’s purchasing power goes down.
In normal cases, central bank’s interventions may prove to be enough to control the situation, but it is much safer to hedge your portfolio against inflation by investing in gold.
During hyper-inflation, which usually follows political crisis in a country -like that happened in Germany after the First World War (WWI), Prices soared so high that paper currency became useless.
A truckload of cash was required to buy a loaf of bread in Germany, during those times!
We need not look far back in history to find examples of hyper inflation.
Many countries today are suffering economic hardships such as Venezuela, Brazil, Argentina and Turkey to name a few.
The case of Venezuela is particularly grim. You don’t believe me?
See this graph, showing value of gold against Venezuelan currency (Bolivar)
Yes, it is 211 million Bolivars. You are not mistaken.
It will take a person 200 million Bolivars to own an ounce of Gold in Venezuela!
I sincerely hope that we don’t have to endure such cruel hyper-inflation, but being prepared certainly does not hurt.
You can read further about hyper-inflation here.
Though they are not as scary as the one presented above, Similar trends can be found in other countries going through tough times.
Gold’s demand is growing around the world with increasing geo-political uncertainty.
With American turning protectionist under the Trump administration, governments across the world have become wary of the U.S Dollar as the world’s currency.
World’s largest economies like Russia, China and India have been ramping up their gold reserves.
Currently United States has the largest reserves of Gold in the world, followed by Germany, Italy, France and Russia.
With global debt levels mounting, many central banks around the world are also consolidating their hold on this Nobel metal.
Russia in fact has been aggressively buying gold, surpassing even China as can be seen in the graph below:
You can visit the link appearing above for a more detailed analysis.
Okay I got it, but where to buy gold from?
I know what you are thinking. Don’t worry, I have got you covered here.
You can invest in gold in many ways- Buy gold bonds, ETF’s or physical gold.
Each has it’s own merits and this requires a separate article in itself. I nay opinion it is always good to hold some amount of gold in physical form.
I would recommend Sovereign-man article on physical gold.
I am sure you are going to like it. You can visit the site here.
That’s it folks. Thanks for going through the full article.
I will be writing more often from now, bringing you the best possible insights from the world of business and investing, in a simple and lucid form.
Hope to hear constructive feedback from all of you.