Overview on investing in gold
Investing in gold is one way to invest safely for anyone, so a lot of people resort to it, and in this article we will ink you in every small and small way about investing in gold.
The economic importance of gold
Gold is one of the economic elements of any country, and the importance of gold is due to the fact that it is the determinant of any country's monetary reserves.
In other words, the cash reserve is determined by the amount of state-owned gold in its central bank, and based on that amount of gold, the state can determine the amount of currency it will print.
This was to avoid both inflation and deflation of the country's economy.
So we can say that the amount of gold that countries have as a cash reserve determines the strength and weakness of their economies.
There are countries with a cultural heritage of gold such as Egypt, and you can learn more about Pharaonic gold from here.
We will offer a simple overview of the concept of inflation, for example.
Inflation and its relationship to gold
Simply what is inflation, inflation is the ratio between prices and the value of money in the sense that 100 pounds may buy a kilo of meat, for example and you may buy a kilo of oranges in the second case shows a gap between the value of money and what it can actually buy.
There are many reasons for inflation, but what we are interested in in this article is the relationship of reserve gold to inflation.
We have also already mentioned that the financial system uses gold as a rule to determine the amount of printed currency of a country.
Thus, as long as there is a cash reserve of gold, the state can print the money.
One of the reasons for inflation is when the state prints money without the cash cover of gold, hence there is a price gap, because the value of that printed currency is undervalued.
So the currency that might buy you a kilo of meat, you'll only buy a kilo of oranges.
The more printing increases without the necessary cash reserves, the lower the value of the currency.
This demonstrates the importance of the presence of gold and its value to countries.
Why gold prices are rising
Gold prices are affected by the economic conditions surrounding, in the presence of an outbreak of disease or global epidemic such as Coved-19 and what we have seen from the complete economic disruption of some countries and the decline of the economy in all countries in general many investors resorted to buying large quantities of gold.
The big increase in gold prices came after the US Federal Reserve announced a reduction in interest rates on the dollar.
This prompted investment banks and large venture capitalists to invest in gold.
Many of them found that after the interest rate cut on the dollar they were investing in, gold would be more profitable in the long run.
Some have resorted to investing in gold for fear of a collapse in the dollar.
Read also: Why should you calculate the return on your investments annually?
Is investing in gold still safe despite its high price?
Is investing in gold still safe despite its high price?
A question that many are asking now.
To answer this question, we must ask two more questions:
The first question is whether gold prices can fall again or not?
The second question is the duration of the investment period in the sense that your investment in gold will be in the short term several months or a year or in the medium and long term two years or more?
1- The possibility of falling gold prices
There are two factors affecting gold prices:
The first factor is commercial and economic decisions because if countries encourage investment through tax cuts or easy loans for projects or other government decisions that contribute to the infusion of capital from investors to the markets, this contributes significantly to the devaluation of gold because the demand for it will be reduced by investors.
The second factor is the prices of the dollar, international currencies and the interest rate of investing in currencies, as mentioned earlier what contributed significantly to the increase in the price of gold is the decision of the U.S. Federal Reserve to lower the interest rate on the dollar, and therefore when the dollar prices rise and increase interest rate again will direct a sector of investors to invest in the currency, and thus followed by a decline in gold prices.
Some people think that because of these factors, investing in gold is insecure, but it depends mainly on the answer to our second question, which is the duration of the investment period, will your investment in gold be in the short term or in the medium and long term?
2- Investing in short-term gold in gold
No expert in the world of finance and investment can recommend investing in gold in the short term.
Because in this case you are at risk of losing or at least you will not earn an increase on your capital.
But only you will retain the value of your money so if you intend to invest in the short term, it is not at all preferable to investing in gold.
3- Medium- long-term investment in gold
In general, we can say that investing in gold has a long- and medium-term return.
Gold prices are doing better in the long run.
Since 1971, the World Gold Exchange has determined a 10% annual rise in the value of gold prices, while prices have increased by an average of 4.5% annually in the last 10 years.
This indicates the value of gold not maintaining the value of your capital.
But profitability and there are a lot of people who may have money but are not investors.
Therefore, the investments available to them are either investing in gold, currency or real estate, and we will explain in some detail in the next article the difference between the three investments and the profitability of each.
But we can sum up to say here that if you have money and compare the third investments between real estate, currency and gold.
Many financial experts recommend investing in gold provided your investment is medium and long term, not the near term.
Ways to invest in gold
There are several ways and types to invest in gold, you can buy gold bullion and gold coins as well as gold coins and invest in the gold exchange and
1- Types of investment in gold: buying gold bullion
First, compared to other commodities, gold bullion is easy to buy and easy to sell as well.
Because an individual can easily buy gold bullion from gold shops and in some cases can be bought from the banks themselves.
The gold alloy is characterized by high purity, with 99% of the alloy's weight.
Therefore, the alloy maintains its value, unlike in gold and jewelry, where the value of the plant, stamp or the value of gold artifacts decreases.
Alloys are available in sizes ranging from a quarter of an ounce, equivalent to about 8 grams (31.5 grams) and up to 5 kg alloys.
The larger the bullion, the better the gold storage safe is to keep it from being lost or stolen.
In the case of investing in large amounts, it is preferable to rent a bank vault to keep the gold in it, especially.
The annual rental of some bank vaults is simple if measured throughout the year.
2- Types of investment in gold: gold artifacts
Many people prefer to invest in gold ware slotbecause it allows the investor to experience the enjoyment of them.
But as we mentioned, the problem with these artifacts is that you are losing the value of the plant and the stamp.
If you're a fan of wearing gold ware, the lost value won't be much for the long-term profitability.
And there are types of gold artifacts according to the percentage of gold in each type.
However, the 21-carat artifacts are the most traded, and the proportion of pure gold is 875 of its weight.
It can also be easily formed and is therefore better than 24-carat gold, which reaches a net gold of 999 pounds.
Therefore, the difficulty of forming gold 24 unlike gold 21, from which there is a large variety that satisfies almost all tastes.
3- Types of investment in gold: gold coins
Some go to invest in gold coins and gold coins as opposed to bullion, they contain some copper.
It weighs approximately 91.67% of its weight in pure gold and is also paid for by a manufacturer and stamp.
And therefore, like the gold artifacts, you lose that factory and stamp when selling, and although it is not the best investment, some resort to it.
4- Types of investment in gold: investing in the gold exchange
This is what investors know about buying gold funds and large investors prefer to make this type of investment.
One of the most profitable ways of investing is if you are familiar enough with understanding this type of stock exchange, because in general gold stocks rise and fall faster than the price of gold itself.
Therefore, you can't risk the gold exchange unless you study and understand how that stock exchange works well so you don't lose your money.
5- Types of investment in gold: gold futures
First, let's get to know the concept of futures, futures contracts are a type of financial contract through which one of the different types of financial goods and instruments is sold or purchased at a predetermined price and the delivery of the commodity is at a specific future time to be agreed between the signatories of the agreement.
Investing in gold futures is to buy a specific amount of gold with a standard of today's price.
For example, let's say you bought a kilo of gold at a certain price a year ago, but the receipt date was one year after the contract.
So now you have a kilo of gold that you can sell at today's price, and gold futures are traded like other futures on the stock exchange.
6- Types of investment in gold: gold deposit certificates
Is the way to invest gold through gold deposit certificates.
This is easier for small investors than the risk of investing in the Gold Exchange.
It allows the investor to buy or sell gold at the same price as ever before.
Thus, the investor is given the idea of storing gold as it happens with bullion.
The investor can recover them either in cash or gold bullion.