Should I Invest in Gold?

At times, historical accounts can make us feel like our distant ancestors were another species entirely. We often don’t understand their languages, their cultures, their beliefs, or their lifestyles. These factors may confuse or shock us, but there’s always been one thing that we all have in common – we all understood the importance of gold. Very few things on Earth have affected the human race as much as gold. People have killed each other for it, others have died in search of it, and many empires have been built on the back of it. But why? Why has this yellow piece of the metal always held so much sway? Even in the modern era, many people still obsess over the gold that they own and the opportunity to get their hands on more. But should we? Is gold really still worthwhile as an investment? And what makes it so special? Should I Invest in Gold?

Gold isn’t an inherently good or bad investment. It has various upsides and downsides that need to be considered before any major financial commitment is made. When asking the question – Should I invest in gold?

The only way to really find the answer is to look at all of the pros and cons related to such an investment and ask ourselves if they suit our needs and wants. 

Should I Invest in Gold?
Should I Invest in Gold?

Is Investing in Gold a Good Idea?

Investing in gold may be a good idea if it offers you the benefits that you’re looking for. With this in mind, let’s take a look at the different aspects of gold and then try to determine whether or not it’s a worthwhile investment. 

The Advantages of Investing in Gold

Portfolio Diversification – Remember the old saying, “Don’t put all your eggs in one basket”? Well, the same thing applies to your investments. If you put everything you own into one or two securities and both of them crash, you could be looking at financial ruin overnight. Gold is normally seen as one of the more ‘safe’ investments, so having a little bit of money invested in gold can help to ensure that you don’t lose everything all at once when things go wrong.
Hedge Against Inflation/Recession – While there is some debate over this topic when inflation hits hard, gold usually appreciates. As a result, gold is normally seen as a good (though not perfect) hedge against inflation. Additionally, gold’s general consistency is frequently sought after when recessions and other disasters hit. 
Security – Although gold has experienced a few ups and downs throughout history, it has a habit of keeping up with things in terms of their value. Even when the value drops, you can normally be sure that a big chunk of gold will always have some sort of worth. People like to spend a bit of money on gold now because they’re convinced that it will have the equivalent value (more or less) in the future. By contrast, that same amount of money could be relatively worthless in a couple of years if you don’t find a way to make it grow. 

Sounds pretty great so far, huh? Well, it’s not all so rosy, let’s look at a few of the problems surrounding gold investments. 

The Disadvantages of Investing in Gold

Lack of Returns – A lot of investments can offer some sort of yield over time. You may receive dividends from other investments, but gold will only net you a return when you sell it. In other words, you won’t be receiving any passive income from your gold investment. 
Comparatively Low Growth – While gold may increase marginally in value over time, it’s usually seen as a type of safety net rather than a way to make money long term. If the market crashes and you’ve got a lot of gold, you may be very happy that you made the investment. But if everything goes on perfectly, you may realise that the money you put into gold could’ve been far more profitable if it had been invested elsewhere
Storage and Costs – Unless you’re going to go full pirate mode and bury all your gold underground, you’ll probably want to keep it somewhere secure like in a bank. This comes with certain storage costs that you’ll need to pay. Additionally, transaction costs for physical gold are normally higher than their electronic investment counterparts. 

As you can see, gold can’t be easily defined as a good or bad investment. You’ll need to consider your own personal situation and weigh things up from there. If you’re really worried about a potential economic downturn and the value of your stocks, maybe investing a little bit of money into gold is a good idea. 

On the other hand, paying it safe may result in far fewer gains down the line. 

Should I Invest in Gold?
Should I Invest in Gold?

Why has Gold Always Been Valuable?Should I Invest in Gold?

Originally, gold had value because of its unique blend of qualities which made it an ideal form of early currency. It is soft enough to be easily turned into coins, it doesn’t rust, it’s not radioactive or highly reactive, and it’s easily recognisable. 

Additionally, gold is plentiful enough to be used widely but not so plentiful that anyone can just go dig some up in their back garden and turn themselves into a millionaire overnight. All of these points made gold an ideal medium for creating coins and developing a currency, however, in recent years, the gold standard was dropped and most countries began using fiat currencies that were not backed by the value of gold. 

So why is it still so valuable today? Well, it probably comes down to mankind’s view of gold more generally – if everyone believes that an object is valuable, that belief makes it valuable. 

All around the world, people still view gold as having an intrinsic value that does not require the backing of any government or institution to maintain its worth. As a result, gold is still seen as valuable even if it isn’t as rare or as practical as other metals. 

A big draw for gold investors in the modern era hinges on the idea that the currency of their specific country may become worthless if disaster strikes, but gold will always be seen as precious no matter where you are. 

How Much is Krugerrand Worth?

The average value of Krugerrand changes slightly over time, so you’ll have to check the specific price when you intend to buy or sell it.

That said, certain factors do affect the overall worth of Krugerrand as well, these factors include – 

  • Gold Content/Purity
  • Size
  • Condition (whether it’s circulated or uncirculated)
  • Special Preparation (eg, proof coins)

Obviously, the most important thing to check before buying or selling Krugerrand is the current market value of gold. 

What is so Special About Krugerrand?

Krugerrand coins are among the most popular options for gold investors who wish to take advantage of all the benefits we’ve been through so far. 

Part of their popularity comes from their high value and small size which makes them easier to manage and store

Some Krugerrand coins also come in special edition versions which can increase their value in the eyes of collectors

How Much Gold Can I Keep at Home?

While there’s no real limit as to the amount of gold you can keep at home, it’s probably wiser to spread it out a little and avoid storing it in one location. So Should I Invest in Gold?

Most gold investors tend to keep their reserves at the bank in a safety deposit box. It may seem like a good idea to skip this step and the storage costs that come along with it, but storing all your gold at home can be dangerous in a country with such a high rate of crime. 

Should I Invest in Gold?
Should I Invest in Gold?

Can the Government Take Your Gold?Should I Invest in Gold?

Fears over the confiscation of gold by the government usually stem from the Executive Order of US President Roosevelt in 1933. While this kind of thing does provide some precedent for the idea that the government could end up confiscating your gold, it is important to remember that this event took place in the middle of the Great Depression and was authorised due to the ongoing national crisis.

In other words, in a nightmare scenario, the government may take away your gold, but that really shouldn’t be your main concern when investing. 

If the government ever actually got desperate enough to start confiscating gold, you’d probably find that a lot of your other civil liberties would be in danger too. 

In Conclusion – Should you Invest in Gold and Why is Gold so Valuable?

Gold can’t be simply defined as a good or bad investment. It has multiple pros and cons that need to be considered against the backdrop of an investor’s individual financial situation.  For the most part, gold is normally seen as a ‘safe’ investment that will likely have some intrinsic value regardless of when you hold it. While there have been some ups and downs in the overall value of gold through the years, it remains a fairly static investment which usually manages to maintain its worth in the face of inflation. 

For this reason, gold is usually seen as a hedge against inflation and a great way to diversify your investment portfolio to ensure that you won’t lose all your finances overnight, even in the face of an economic downturn.

Gold investors usually bet on the fact that, while any currency could experience a major dip in value at almost any time, gold will always maintain some sort of overall worth. Unfortunately, gold also has some major drawbacks that have to be considered. For example, gold is known for having relatively low growth and usually does not provide returns to the investor. As a result, gold may be a great way to keep your money, but it is normally a poor vehicle with which to grow your money.

Additionally, gold has to be safely stored once you purchase it. Keeping it yourself could prove to be dangerous while banks and other institutes charge a storage fee.

For many centuries, gold has been useful as a form of currency for multiple reasons. It was easy to form into coins, it was non-reactive and free of harmful elements, it was easily identifiable, and, perhaps most importantly, it was plentiful enough to be used as currency without being so plentiful that it could be too easily obtained. In recent years, countries have dropped the gold standard and introduced various fiat currencies in its place. The value of gold remains high however, mainly because human beings attach value to it. 

Disclaimer Finance101: All of our posts are for research purposes only. Finance 101 aims to assist its readers with useful information on the laws of our country that can guide you to make financial decisions that will enable you to become more financially independent in the future. Although our posts cite the constitution in many instances, they are intended to assist readers who are looking to expand their knowledge of the law & finance-related queries. Should you require specific legal/financial advice we advise you to get in touch with a qualified financial expert.

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