Gold is considered a good investment for various reasons : its intrinsic value, the protection it offers against inflation, the diversification it represents in a portfolio, and also the security it may provide during periods of economic or geopolitical crisis.
An efficient protection against inflation
Gold is often considered a safe haven in times of inflation. When inflation rises, the value of currencies may decrease, but gold typically maintains its value. Therefore, investors buy gold as a means to preserve their purchasing power.
A continuous value throughout the ages
Gold is a precious metal that possesses inherent and enduring value over time. It is also used as a material in various industries such as jewelry, electronics, and dentistry, which contributes to its constantly growing demand.
A real insurance in times of crisis
Gold is also considered a store of value in times of economic or geopolitical crisis. During periods of instability or uncertainty, investors often turn to gold for the protection it offers against market fluctuations and systemic risks.
PHYSICAL GOLD OR PAPER GOLD ?
Physical gold and paper gold are two forms of investment in gold, but they differ in their nature and mode of ownership. Here are the essential differences between physical gold and paper gold.
Nature of the investment
Physical gold refers to the tangible asset that is found in the form of coins, bars, or jewelry. It is, therefore, a direct investment in gold itself.
Paper gold, also known as financial gold or digital gold, refers to financial instruments based on gold, such as gold certificates, gold futures contracts, or shares of gold mining companies. It is an indirect investment in gold, where the actual ownership of gold may not be involved.
Physical gold can be physically owned by the investor. It can be kept at home, in a personal safe, or deposited in a secure storage facility.
Liquidity and ease of transaction
Physical gold can be physically possessed by the investor. It can be kept at home, in a personal safe, or deposited in a secure storage facility.
Paper gold is typically more liquid and easily tradable in financial markets. Transactions can be conducted more quickly, using online trading platforms or through brokers.
Physical gold provides a form of direct ownership, which reduces the risks associated with third parties and the solvency of financial institutions. However, it carries risks of theft, secure storage, and transportation.
Paper gold holding carries additional risks such as counterparty risk, which refers to the dependence on a financial institution or company to fulfill its obligations. There can also be a risk of default or non-delivery in case of financial crisis or bankruptcy.
Exposure to price fluctuations
Physical gold provides direct exposure to the fluctuations in the price of gold. Gains or losses depend on the movement of the metal’s price itself.
Paper gold can be exposed to other factors, such as market movements, interest rates, and confidence in the issuing institutions. Gains or losses may be influenced by these factors in addition to fluctuations in the price of gold.
It is important to note that the advantages and disadvantages of physical gold and paper gold depend on individual preferences, investment goals, and risk profiles of each investor. We believe in the importance of diversification in all matters.
The information contained on this website is not an invitation to invest in gold or gold contracts. Any investment decision should be made taking into account your knowledge and personal situation. Securor provides no guarantees regarding the future returns of the mentioned products. If you do not have sufficient knowledge of finance and investments, please discuss it with your financial advisor.