Gold is one of the oldest investments in the world, and has been used as decoration since prehistoric times. It has become a globally recognized currency several thousand years ago, and its long history has led investors to see gold as a safe haven. There are many reasons to invest in gold, but there are also many drawbacks. On the professional side, gold is recognized as a safe haven investment, has low long-term volatility, and is easy to understand.
It can be a great hedge against inflation, as it has been valuable throughout human history and most signs suggest that it will continue to be valuable in the future. Gold also has the advantage of being less volatile than stocks, bonds, and other investments, which can gain or lose value quickly. However, there are some potential drawbacks to investing in gold. Transaction costs can be high, storage can be an issue, and liquidity can be limited.
Additionally, buying physical gold often comes with high selling costs and carries the risk of trusting the retailer to sell pure gold. If you don't care whether or not you can touch the gold you own, then the cheapest way to buy it is through an exchange-traded fund (ETF) or a mutual fund. If you have gold bars or coins, you'll need to store them in a safe in your home or hire a storage company to keep your precious metals safe. You may also have to accept high fees or premiums if you buy gold from local banks.
Finally, its speculative nature of value may be precarious for conservative investors. One of the advantages of owning shares in gold miners is that you can earn dividends, unlike any other type of gold stock. If you are sure that the price of gold will rise and you want to maximize profitability, gold stocks are the best option. However, gold pays no dividends and shouldn't be a major part of your overall portfolio if you really want to maximize your profits.Ultimately, whether or not you own paper gold or physical gold will depend on the reasons you own it.
People may prefer to rely on gold over stocks and, therefore, gold can steadily appreciate in long-term value, while stock markets will sooner or later fall and may take many years to recover. Even though gold is considered a safe haven, it is still quite volatile and also the price of gold changes significantly.
