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.
Why is Gold Valuable?
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.
Who are the Top Individual Investors?
John Paulson
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).
Stanley Druckenmiller
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.
George Soros
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.
Janet Yellen
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.
Who are the Largest institutional Gold Investors?
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.
What is the Gold Standard?
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.
Other Gold Investors
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 Jewelry Industry
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:
- Religion: The Diwali festival ushers out the old year to make way for a prosperous new one. It’s traditional to wear gold as symbolic of the wealth you’ll attract in the future. The metal is sacred to Lakshmi, the goddess of prosperity.
- Weddings: Gold is an auspicious metal and is traditionally worn at any Indian wedding. The bride’s jewelry ensures that the wedding starts with an investment and that the couple has a nest egg.
Other Countries
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.
Common Types of Gold Investors
There are two kinds of investors, including:
- Those storing value
- Those speculating on price movements
The Benefits of Storing Value
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:
- Easy to store
- Collectible
- A cost-effective way to invest
- Simple to sell
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.
Those Speculating on Price Movements
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.
Is Gold the Correct Investment for You?
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.
Ask yourself:
- Do I require maximum growth?
- What is my risk profile?
- Am I young enough to ride out dips in risky investments?
- Do I require more advice to make up my mind?
- Must I draw an income or allow for capital growth?
- Do I have money that I can leave in gold long-term?
The investment goals diverge for each investor. Here are a few examples:
- Sam inherited a coin collection from his father. He carries on the tradition, intending to pass the coins on to his son. Sam is more than just a holder of value; he’s creating a family legacy.
- Jane is worried about the state of the world economy in a pandemic. She’s not happy to have all her money in fiat currencies, so she invests in gold as an alternative.
- Caleb sees his coin collection as more valuable than the precious metals it contains. Some of the coins are rare collectibles and worth a lot more.
- Janice isn’t interested in coins at all; she wants to buy gold bars. She has nowhere safe to secure these assets at home and hires a company to handle the purchase, movement, and storage for her.
- John got to the party late—he wants to buy gold, but it’s at an all-time high. He’s retiring in three years and won’t be able to leave the investment longer. The limited-time makes this type of investment risky for him.
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.
Oxford Gold Group: Experts in Gold Investments
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.
