People buy gold for several reasons, not the least because it is an appreciable asset that should outpace inflation. Some buy gold as they believe it’s safe, or for cultural reasons. Others speculate that its cost will rise over the long run.
Whatever the reason, the core is the same: gold is valuable and typically appreciates long-term.
In this article, we’ll consider who is investing in gold and the primary motivations behind the prominent and most enthusiastic gold investors worldwide.
Gold is a finite resource. Its malleable properties and oxidation resistance made it a popular choice for jewelry through the ages. Since the advent of the smartphone, however, it has become even more prominent in trade and industry.
Gold has corrosion-resistant properties that make it useful in electronic components. Its non-reactivity also makes it useful in other modern disciplines, such as dentistry.
Global production currently falls short by 1,045 metric tons annually—we use more gold than we mine, and demand edges ever higher.
John Paulson became something of a legend with his 2007 prediction that the housing market would collapse. Considering the state of the market at the time, it was a crazy assertion. However, the massive economic crash the following year vindicated him as it shook the entire world.
Paulson invests in gold stocks, bars, and exchange-traded funds (ETFs).
A sharp hedge fund operator, Druckenmiller is famous for his faith in the lustrous metal. He dumped all his holdings the night before Donald Trump was elected to be president, which had a significant effect on the industry.
If that wasn’t interesting enough, he has since started reinvesting in precious metals, including gold.
Soros may not be the gold market’s most avid supporter, but he’s well invested in it. He’s been known to tease investors for buying bullion rather than stocks. However, it seems that he doesn’t always take his own advice—in 2017, he invested $123 million into the top gold ETF.
The powerful first chairwoman at the Federal Reserve knows the value of gold in any form. The Trump administration ousted Yellen but she will return under the Biden administration. This time, she’ll be the first female Secretary of the Treasury.
Her new role will make her even more influential than her previous one, and she is still investing in gold to diversify her holdings.
The United States government tops the list of gold investors with 5% of the world’s total stock. It was thanks to the leadership under the Gold Standard until 1971 that America still holds this position.
It’s fast becoming an outdated concept, but the Gold Standard was a way to support your printed currency. Fifty years ago, American currency was backed by gold, dollar for dollar. The concept originated in the Byzantine era to ensure paper money had a value that could be held in your hand, traded, and secured.
Many countries still have extensive gold reserves for this same reason. However, few still use the Gold Standard in its traditional form.
The International Monetary Fund (IMF) takes the title of top non-governmental agency in the gold investment category. Founded in 1944, the consortium now represents 189 nations to enhance financial co-operation across the globe.
The IMF requests some membership fees in gold and allows members to trade it.
The average person thinks of gold jewelry as daily use for the metal. Gold necklaces, pendants, earrings, and many other items abound with value as gifts, investments, and even safety nets for a rainy day.
India supposedly holds the world’s most extensive stock of gold in jewelry form, and there are two main reasons:
Germany is another of the countries that have stepped up gold purchases. The metal is seen as a stable investment. It also became more popular after the introduction of the euro.
Many investors feel that gold is a superior investment to currency because its price is less volatile. Most Germans prefer buying gold compared to owning government bonds and typically buy it in bars or coins.
There are two kinds of investors, including:
Investors who store gold for value reasons buy the metal to safeguard their wealth. It might be in the form of bars, jewelry, or coins.
In particular, gold coins are especially popular as:
Those who rely on gold assets as an investment may opt to store them with a registered depository. These firms employ high-security protocols to protect the assets under their care.
The advantage of such an investment is that it’s not a sentiment-driven market. The investor keeps the gold on hand, rather than a stock or ETF certificate. Should the stock market crash, there is still an asset that’s easy to liquidate.
Speculators typically buy stocks or ETFs to track the gold price, not physical commodities. The advantage of doing so is that it’s easier than finding somewhere to store your gold. The disadvantage is that the costs of these instruments are volatile.
When investor interest is high, the cost of these instruments rises disproportionately to the price increases of gold. So, while most view precious metal investments as safe and stable, the contradictions sometimes make that sentiment appear less convincing.
It’s crucial to understand the market and how it works to successfully speculate on gold prices. If you’re unsure, investigate a gold-backed investment—the company buys gold on your behalf, so it’s always supported by an asset.
Investing in precious metals should be viewed as a long-term strategy to ride out price fluctuations. For example, one troy ounce would have cost you $20.68 in 1900. By the end of 2020, it was $1,769.
Before you rush out to throw all your money into gold, you also need to understand that growth isn’t guaranteed. At the end of 2012, a troy ounce cost $1,668.98. Just three years later, it dropped to $1160.06.
Gold returns typically average 10.6% over a ten-year term. Equities, by comparison, are at about 15%.
It makes sense to make precious metals a part of your portfolio but not the focus of it. Rather, consider diversifying your investments to match your investment goals.
The investment goals diverge for each investor. Here are a few examples:
Reasons and investment vehicles differ, and every situation requires careful consideration. Precious metal investments are at an all-time high in the wake of the economic difficulties brought on by the coronavirus pandemic. The gold price also often moves in the opposite direction to general stock prices.
When investor confidence in stocks is high, equities strengthen. When confidence in the market is low, investors look for more stable options, like bonds and precious metals.
As one of the industry leaders in precious metal investing, Oxford Gold Group is skilled at matching clients with the ideal opportunities. Our team will assist you in the purchase, transfer, and storage of your shiny new nest egg.
If you’re interested in learning more about precious metals or you want to create a gold-lined future, schedule a consultation with our gold experts at 833-600-4653 today.
INSIDE THIS INVESTMENT GUIDE YOU WILL LEARN:
• How Gold & Silver can protect your savings & retirement accounts
• Types of Gold & Silver products available for Home Delivery
• How a Gold & Silver IRA can protect your Retirement account