Why buy gold?
Gold has endured centuries as a mark of wealth, it is indestructible, relatively scarce and cannot be manufactured. It provides a refreshing departure from the complex investment products in the headlines today.
Gold provides a portfolio balance.
There is a finite supply of gold in the market, which creates exponential price rises when demand increases. When demand increases, production cannot simply rise to match demand, so the supply/demand dynamic naturally pushes prices higher. This also reduces the risk of devaluation as lower prices quickly attract new demand, which will once again fuel price increases.
No counter party risk.
In its physical form, the holder has no risk to any counter party. This is particularly relevant in today’s new financial world, where money is no longer even safe simply in a bank account. It also avoids the counter party exposure that investors in gold stocks, futures and options have.
More than just a valuable investment, gold coins are part of the nation’s historical heritage, and can be both beautiful and collectible. In fact, many gold investors and collectors take great pride in their coin portfolios, often preserving them within their families for several generations. Note, this also contributes to a decline in the market supply of gold, once again increasing gold’s value!
Cash is not King!!
Investors worldwide are nervous about the global financial crisis, with Governments committing to huge bank bailout packages, which will inevitably have to be funded by the tax payer.
The very fundamentals of banking have changed forever, with the perception of strength and safety now a thing of the past.
In Europe we’ve witnessed countries such as Portugal, Greece and Spain struggling to repay debts within the constraints of the single currency. In the US, we’ve seen the Dollar continue to depreciate, and many no longer regard it as the world’s reserve currency.
We have not escaped this in the UK, and a majority of our large high street banks are now partially nationalised. We have the first coalition Government since 1945 - inevitably meaning indecision on major policies. With interest rates, and therefore savings rates, at all time lows, returns on bank deposits are negligible. In fact, with the pound depreciating, and the threat of hyper-inflation as the central bank considers printing more money supply, returns can actually be negative. Simply parking money in deposits is no longer the safe haven it once was.
The fact is that faith in numerous major world currencies is at an all time low. Concerned savers and investors are seeking a new, more reliable store of wealth, and many have turned to gold. Simply leaving your savings in the bank and burying your head in the sand will not safeguard the value of your money. It is the proactive saver who is now moving some of that money sideways into gold to reduce their exposure to traditional currencies.