Since the dawn of economics, gold has been an essential part of human history as a currency. Although it is not currently considered a primary currency, this does not mean it cannot still be regarded as a viable investment in the long run.
Gold is an asset with good liquidity, a value maintained or tends to grow, and is resistant to any currency’s inflation. Although the other can decline when there are severe currency depressions, it is extremely profitable to invest in it most of the time.
While investing in gold sounds like a simple process, many of us lack the knowledge to manage this great asset. In this article, we will give you the secrets you need to know to invest in gold successfully.
Secrets to invest in Gold: Advantages and disadvantages
To invest in gold, we must first know how this market works. Just like any other asset, knowing the advantages and disadvantages of working with gold will give us a complete picture and clear up doubts about the purchase.
Advantages of working with gold
Gold may no longer be a primary economic or current currency method. This fact does not make it less valuable within society, and this is due to its significant advantages. Among these, we can find:
Gold is one of the most accessible assets to transform into cash anywhere in the world. This fact makes it easy to sell if money is needed to carry out any other purchase or investment.
Safe and stable in price
Gold is an asset that provides excellent stability when investing in it. Its price varies very little, making it ideal for holding savings and protecting capital.
In addition, it tends to revalue when there are significant episodes of inflation, avoiding any currency deterioration and serving as a shield for inflationary periods.
Globally used commodity
Part of its liquidity is due to its usefulness in industry. This feature means that it is always in continuous demand, so it is easy to sell and highly valued.
In addition, it is an asset that is considered a desirable investment. Several organizations invest in gold due to its characteristics, making the economic processes that involve it much more manageable.
Disadvantages of working with gold
Just as gold has many advantages, it also has significant disadvantages. Its benefits outweigh its cons, but it is ideal to know them all.
It does not generate passive income
Gold is not called the most stable asset for anything. Likewise, since its price does not tend to go down, it does not go up very often either. In addition, it also does not generate income outside of selling it when its price rises, unlike other investments such as bonds or stocks.
The price of gold can be speculative
In unstable economies, gold can obtain a false value due to the large number of users buying it to avoid losing their capital. Therefore, it is ideal to avoid buying in periods of panic or take advantage of them to sell and buy when the price stabilizes.
Gold appreciates very slowly
Rises in the price of gold usually occur when the local currency is devalued due to inflation. This causes gold to increase its price slowly but steadily, not generating explosive gains like other assets.
When should I invest in Gold?
To invest in gold, we must know how the world economy is performing. Gold has a highly stable price, but its gains are linked to global inflation.
When we suspect that there will be a fall in the local currency due to inflation or when there are indicators of a fall in the stock market, these are ideal moments. We can add moments of political instability or announcements of additional printing of physical money.
If we invest in gold at these times, we will obtain double income for having made a wise move. First, we will protect our capital against the devaluation involved in these processes, and at the same time, we will be able to wait for the gold to revalue when other buyers seek to buy as well.
Remember that economies are cyclical, so when demand is very high, and the price is high, the ideal is to sell and buy again when they stabilize and the market falls.
How should I invest in Gold?
Investing in gold has different modalities, each with its advantages and disadvantages. If we know which is more profitable for what we want to do with our capital.
Physical purchase of gold
This type of investment is the simplest and most traditional way of investing in gold. This modality allows us to always have gold on hand in the form of jewelry, ingots, or coins, making it easier to sell it and not needing many intermediaries.
However, we must also invest in transportation and security since they can be lost or we risk being robbed.
Shares of gold companies
Buying shares is always a very productive way of investing, but you need the experience to go through the process. Additionally, since it is not an investment in gold but in shares of gold-related companies, it may pay dividends.
On the other hand, selling this type of share is more complicated than selling gold, so we lose liquidity.
Gold futures contracts
Investing in financial derivatives and call-and-put options requires experience, which will allow you to make large profits.
Is it profitable to invest in Gold?
Gold is the same as any other investment: if we inform ourselves properly and calculate costs, it will give us a huge profit. Declaring ourselves of the current market situation and taking advantage of the highs and lows will enable us to make even greater profits.
On the other hand, if we invest so much in inflationary processes or only invest in safeguarding capital, there is no way we can go wrong: gold is the best ally.