Pros and Cons of Investing in Gold You Should Know About

Gold has been the item of luxury for hundreds of years since its discovery. Gold has stood the test of time, and today is still one of the symbols for rich and affluent people. Not only for showing, gold can be used as an instrument of investment. If you are considering using gold as one of your investments, here are the pros and cons of investing in gold you should know before making the decision.

Why Is Gold So Valuable?

Gold was first invented in Egypt almost half a thousand years ago, and because of its shining quality, durability, especially its scarcity, has stood the test of time as one of the ultimate symbols of wealth and luxury. Gold has been the cause of a lot of things, even wars and human betrayals.

There are three main aspects on why gold is so valuable, the first one is its scarcity. Gold is placed on the top of the ranks of metal because of its scarcity, but not scarce enough that it couldn't be used as an exchange unit globally. Compared to other metals, gold has a finite amount in the world, which makes it so valuable.

The second aspect is the fact that gold is durable. Actually, most of the gold that has been discovered by ancient civilizations still survives to this day. The durability quality is really fundamental which makes gold store its value over time. Not only that, gold is also the only metal that wouldn't react to liquids or gas.

The last thing that makes gold so valuable is because of its malleability. Gold is known for being the most malleable metal in the world because of its atomic structure. Gold's atomic structure is layered, and between the layers, there are no links so they can slide over when pressure is applied. One ounce of gold can be made into a 9 square meter sheet as thin as paper, and can be stretched into an 80 km long wire.

Gold's malleability makes it can be turned into precious jewels like crowns, rings, bracelets, even armors. People can also turn it into coins or bars, making it easier to store and transport. After you know what makes gold so valuable and think of using it as an investment, it's time for you to know the pros and cons of using gold as an instrument for your investment.

Pros of Investing in Gold

One of the unique things you can experience when you are using gold to invest is that gold is uncorrelated with other classes of assets. When they are falling, gold will rise, and vice versa. Adding gold to your investment portfolio will smooths out your return profile.

The next on pros and cons of investing in gold is the security you will get. Gold is a tangible asset that will always be able to hold its value. Because of this quality, both owners of gold and investors can always rely on it when they are using it to invest.

Another advantage of gold, making it a great instrument of investment is the fact that it is an inflation hedge. Gold will preserve your wealth and protect investors when the rates of interest are rising. This is why gold prices will outpace inflation in the long term.

The next advantage of using gold for investment, that might be obvious, is the portability of it. Gold can be shaped into jewelry, bars, or coins in different shapes and sizes, making it easy to move or store. This is important when you have to move a part of your gold or the entirety of it in times of need.

Cons of Investing in Gold

While offering so many advantages, gold also has its own disadvantages. One of the biggest ones is the fact that it wouldn't give you a stream of income. Using physical gold will not give you any dividends, and this fact should be considered greatly. Meanwhile, investing in gold stocks will give you a passive stream of income that will substantially contribute to total performance over time.

Another con of investing in gold is the cost you will need to pay to secure it, especially when you have a lot of gold. The costs of insurance and to secure your gold could eat into the potential profits of your gold investment. Of course you can always store it yourself, but it will lack security and the risk of it being stolen will increase.

Different Types of Gold Investments

When you think of using gold as an instrument of investment, you might immediately think of gold bars and yes, you can do that. Gold bars come in a variety of sizes and usually composed of pure gold almost entirely, at least 99,5%. You can buy gold bars or also can be called gold bullions from collectors, local dealers, or online.

Another type of physical gold you can use to invest is the gold coins that have been around for hundreds of years. The advantage of using gold coins to invest is the fact that it is easy to move or store, but it will cost you a lot to hold them. If you are interested in investing using gold coins, make sure that you buy them from reputable dealers to make sure you will get gold coins in high quality.

If you prefer to wear and show your gold than just store it, then you can use gold jewelry to invest. A collection of gold jewelry can be cashed out when you need it, making it a great emergency plan. Again, to assure the quality of your gold jewelry, make sure to buy them from reputable dealers.

So there you go, everything you need to know including the pros and cons of investing in gold if you are interested in this rare metal. Make sure to consider all of it before you choose gold.