Is Gold A Good Investment? Risks, Advantages, And Disadvantages

    Is gold a good investment?: – Gold is not only a metal that is in high demand but also a metal that has a high monetary value. Although gold is now no longer a primary currency, history records that gold has played a very important role in the economic sector in various countries.

    Gold is also still included as a strong investment and has a long term value. One of the characteristics of gold is that it is value-resistant, mostly stable in its indicators.

    But there may also be disadvantages to this stagnation, such as not being able to make extraordinarily large returns from investing in gold. So, on the one hand, it is safe to invest in gold for its stability, but it also comes with a risk, as the price cannot be influenced by the investor.

    So, is investing your hard-earned money in Gold is advisable?

    To answer this question, let’s look at the benefits that you can get by investing in Gold.

    gold coins

    gold coins

    Is Gold A Good Investment?

    So, let’s discuss the risk, benefits, and disadvantages of investing in Gold.

    Benefits of Gold Investing

    Investing in gold can be in any form, from jewelry to gold bars. And in fact, precious metals can indeed be used as an attractive investment and provide its own benefits. Such as:

    1. Liquidity

    Gold has high liquidity. The point is that gold can be easily converted into cash anywhere and anytime throughout the world. Of course, this can provide convenience for its owner. Plus, the liquidity and universality of gold are also balanced.  

    1. Diversification

    Diversification is one of the main keys to long-term investment success. Adding a safe and different investment to your portfolio is also an essential way to diversify and minimize the overall risk of your investment.

    Read Also: How To Sell Gold Coins For Cash in Nepal? 5 Things Must Know

    Gold can provide you with alternative ways to diversify investments effectively and profitably. This you can do because gold often experiences movements that are opposed to the movements of the stock market and currency values.

    1. Price fluctuations that tend to increase

    Gold is a precious metal that has a value that tends to be stable compared to other types of investment. And in the long run, it will actually increase. Many factors affect the price of gold, one of which is the inflation rate.

    Because the price is always increasing every year, gold can be a smart investment choice. Moreover, the choice to invest in gold bars is different from gold jewelry as it yields you more profit.

    1. Easy Cashing Back

    It is different if you choose property as a means to invest which takes a long time to be refunded because you have to wait for the buyer. Investing in gold is easier to cash.

    So that whenever you are in need of fresh funds, your gold can be sold immediately without having to wait for certain times.

    1. Anyone Can Invest

    Not only certain circles can invest in gold because this can be done by anyone. Especially gold in the form of jewelry, because the price is affordable, designs are attractive.

    Therefore anyone can invest in gold regardless of their income status because you can buy gold with the nominal money you have. No wonder the gold shop is 12 months crowded with buyers.

    1. Stable Value

    Gold tends to be able to maintain its value so far. Even some economists argue that the price of gold does not indicate the value of gold itself.

    Therefore if the price has decreased, the basic value of the gold has not changed at all. The existence of a clear and fixed quantity and the fact that gold is a commodity,  gold to have a very stable value when compared to others.

    1. Can be used as input in the production

    Until now, gold is still included in the type of universal commodity. Plus, the existence of a reliable request and then be able to stabilize the price of gold.

    This is because gold is also used in the production process on a number of products including electronics. In fact, when demand increases, this gold market can push and force the price of gold higher.

    1. Minimal risk

    Investing income in gold provides a number of extraordinary benefits because of the lack of risks. For example, if you save your money in savings, of course, every month the money saved will always be reduced because it is cut by other administrative costs.

    But this will not be found if you invest in gold, whatever gold you have, and as long as anything is saved the price will tend to remain. And even if there is a price fluctuation in the market this will not really affect the price of gold you have.

    1. Can be used as collateral

    As with assets, gold can also be used as collateral to get cash quickly without the need to sell the gold you have. And you can use the services of a bank to guarantee the gold you have because these institutions are safer.

    1. Reserve assets

    Both banks and nations trust and increase their gold reserves. At this point, the specialists recommend that a percentage of 5-10% of the long-term investment portfolio be in precious metals.

    1. Tax-Free

    In contrast to owning shares in a particular company, the benefits of a good investment in a company do not necessarily go directly to the shareholders of the company.

    Because getting this profit is sometimes also followed by taxes or sometimes the form of profit is not in the form of cash but additional shares of the company. Spending your income in gold as an investment is a right choice if you want a tax-free investment.

    1. Protect the Value of Wealth

    With a tendency to increase in value from year to year, the gold is very suitable if called as an investment that is most able to protect the value of one’s wealth.

    Protection of gold investment against one’s wealth can be reflected in the price that is always stable and tends to increase so that when resold, gold investment holders tend to get higher returns.

    Another advantage of investing in gold is that you do not have to do it in large quantities, such as buying it in the form of jewelry. To be sure this investment has a myriad of other benefits with lucrative profits.

    So it is not surprising that there are now many gold shops popping up to attract the interest of the people to those who live in the middle to lower economic level, namely by selling young gold that is quite affordable compared to old gold.

    1. Very Wanted

    In addition to currencies, gold is highly sought after for many other sectors. Examples include the sector of making coins, electronics, jewelry, medals, and many more that require gold as a form of goods. The price of gold as a commodity also depends on the supply and needs of these sectors.

    1. Indestructible

    Gold has always been an indestructible item, whether through corrosion, rust, or stains. Gold cannot be destroyed by fire, but only melts and can be recycled into other items such as jewelry.

    Read Also: Which Type Of Gold Is Best To Buy? The Expert Tips For Gold Buyer

    Disadvantages of Investing in Gold

    It is true that gold can be a large and promising investment for some of the reasons outlined above. Although investing in gold can provide a number of benefits, but of course also not always profitable there are risks that accompany it. And you also need to be aware of these possible risks, as follows for example.

    1. High Risk of Loss

    This is the first risk that must be faced by gold investors, especially those who make gold in the form of jewelry that is used daily.

    This risk arises from a robbery incident that might occur especially if the jewelry used is quite a lot or is striking. Gold investments in the form of bars with a considerable amount are also prone to this risk.

    So to protect their assets, gold investment holders are usually willing to pay more funds to rent a safe deposit box which is a bank facility to store one’s valuables that are considered to have a high enough value.

    1. Fluctuation of Price

    Although the trend of gold prices always increases, the increase does not necessarily occur every day and is not an event that takes a little time. To have a tendency to increase the price of gold, the review was conducted within a few years.

    Gold also sometimes experiences a decrease in selling prices although it is not uncommon to experience an increase. These frequent changes in gold prices have the potential to make it difficult for gold investors to be able to calculate the value of the gold investment in the future.

    Maybe some investors will take the middle value of a fluctuation in the price of gold per gram to calculate the value of their investment in the future with a certain interest rate.

    This might not have much effect on investors with gold investments whose numbers are not too high. But it would be quite a heavy consideration related to fluctuating prices for investors with a large amount of gold investment. So if you plan to have large amounts of gold investment, consider the gold price fluctuation factor.

    1. Vulnerability occurs

    Gold that has a high sale makes it vulnerable to be the object of fraud. This is because not everyone has sufficient knowledge about real or fake gold. Therefore there can be people who are deceived by the gold they have bought despite being accompanied by a certificate of ownership.

    1. Impairment

    As an object that is stored will certainly experience changes so gold in the form of jewelry will also experience a decrease in condition if not treated properly.

    For example, broken, damaged, or discolored due to certain reasons. Because of that, the value of gold owned also decrease. Therefore if you have gold jewelry at home, keep it well so that the shape and condition do not change.

    1. Gold Cannot Produce Passive Income

    Other investments such as stocks and bonds can provide a passive income in the form of interest and dividends. However, in gold investment, returns can only be obtained when the value of the gold goes up and when you decide to sell it.

    1. Gold Requires Physical Storage and Insurance

    If you choose to buy gold in physical form, not only do you need to make secure storage of the gold, but you also need insurance to protect it. If you don’t do these two things, you won’t be able to do anything to replace the gold if there is damage and it is stolen.

    1. An Increase In Gold Value Simultaneously With Currency Deflation

    Many economists argue that the value in gold only increases when the economy experiences deflation or also when there is high inflation. The impact of this is that there are many criticisms that reveal that gold does not offer a high enough return compared to other markets.

    1. Very Small Impact on the Real Economy

    Having a gold investment cannot make a positive contribution to economic growth in real terms. This is due to the fact that the profits owned tend to be used for private interests of investors.

    Although some gold investors use these investment profits for spending or consumption as well as an indicator of economic growth. If the investor invests their income in shares, the profits derived are the roots of company profits.

    These profits will be used again by the company as an investment again or used to finance the running of the company’s wheels to be able to produce more and better products.

    1. Is a long-term investment

    Gold investment is not a suitable alternative for investors who want quick profits. Fluctuations in gold prices that are large enough can not guarantee investors will get large profits in a short time.

    The tendency of the price of gold to rise is a fairly long process, meaning that to benefit from the difference in the purchase price and high selling prices cannot be done in a short time.

    The fluctuation in the price of gold is also largely influenced by national currency exchange rates against foreign currencies. Another cause is the financial condition of the people of a certain region.

    When the community is in good financial condition, other investments that promise higher returns in a shorter period of time such as company stock investments look more attractive and promising.

    Gold Investment Mistakes That Can Harm Yourself

    Gold is among the precious metals that have long been known as a symbol of wealth and one form of investment to protect the value of wealth. The value of gold tends to increase in the long run and can provide a favorable rate of return.

    Although gold investment is relatively safer, you still need to pay attention to a number of conditions so as not to make mistakes when investing. Such mistakes can be as follows:

    1. Not Checking the Purity of Gold

    When purchasing gold in the form of jewelry, you will definitely get gold with other metal alloys as well. This is very different from investing in gold in the form of bars, where you can get pure gold without any other mix of alloys. Therefore, it is recommended to buy pure gold in the form of bars if the investment to gain is your goal.

    1. Not Having Adequate Storage

    Gold is a precious metal that is easy to carry and move. This is what makes gold more at risk of being lost and stolen by others. When deciding to invest in gold, it is important to have a special deposit box in the bank or other safe institutions.

    1. Not Comparing Gold Prices

    Do not rush when buying precious metals. Before purchasing a gold bar, it never hurts you to compare prices in several trusted places in order to get the best minimal price. Because there are sellers who raise gold prices too high when you sense that you are naive. This is very important especially if you are not monitoring the fluctuations of gold prices.

    1. Incorrect Investment Objectives

    Do not buy gold to make jewelry to look attractive when it comes to parties. If you have a goal to get returns in the future by selling them, then you should buy gold in the form of bars.

    Buying gold bars is much more profitable because you will not be charged with the cost of making it when you sell it again. Do not forget to save gold over 2 years so you can get better returns. If you buy gold to get profits in the short term, then gold is not the right choice.

    1. Not Monitor Gold Prices

    Gold price plays an important role when you are going to sell or buy gold. Therefore, you as an investor must make sure to buy gold when prices are low and sell them when prices have risen. Do not sell gold when the price is below the purchase price because it can make you lose money.

    When is the Right Time to Start Investing in Gold?

    The right time for gold investment is when inflation is expected to occur and it drives down the value of the national currency. The sooner and earlier you can detect a decline, the more space, and the opportunity you can get profits.

    Indicators such as the stock market are declining and this political turmoil can indicate an impending deflation in your country’s currency. An announcement by the central bank to print more local currencies can also be a sign that it’s the right time to start investing in gold.

    Read Also: What Is The Gold Price Per Tola In Nepal? How To Know Today’s Rate?

    Because gold is one of the investments that has remained stable when the market goes bad. The most important thing to remember is that you must include and use strategic management in the same portfolio for the allocation of gold as your other investment.

    There are several ways you can do when investing in gold: 

    1. Buy Gold Directly

    You can buy gold directly in the form of bullion or coins in whatever form you like. Then you will save it in physical form, and gold can also be sold later on.

    You might feel very happy when gold is in your grasp, but you also need to be careful about it. The negative aspect of this is that you have to pay to make the gold have insurance and be kept well.

    1. Buying shares at a gold company

    The value of shares in gold will have a strong relationship or correlation with the value of gold itself. Therefore, you can buy shares in a company that produces gold. Profits can be obtained because you will get a dividend on your shares. 

    1. Gold Trading

    Almost similar to another trading, gold trading also provides opportunities for traders to benefit from short-term price increases and decreases. Gold can also be traded accurately and consistently because of gold respects support/resistance.

    You can trade gold well throughout the day on a wide daily range and the biggest movement occurs when there is overlap between the London and New York sessions.

    1. Set financial goals

    To be sure, always start from what amount you have and what amount you want to invest. Investing without a plan will only make you blunder in the end. The purpose of setting goals from the beginning is to help you find the most appropriate way to realize your desires or goals.

    1. Purchasing gold in varying grams

    Buying gold in large grams will be more profitable because the fall in prices will be cheaper than small grams. However, when they want to be resold, small grams will make it easier.

    Because not every party can buy 100-gram gold bars at once. Therefore, it would be better if we but the gold of varying grams. Some in big grams and some in small grams. Each has its own value and different uses.

    1. Save well

    If it’s not much, you can just keep it at home. However, if you have gold in large quantities, you should leave it in the safety deposit box at the bank. Indeed there will be storage costs, but it will better guarantee its safety.

    Gold can be a profitable business investment when other types of investments fail. If you often pay attention to inflation or deflation, then maybe adding gold to your portfolio is the right step.

    It is highly recommended for those of you who are interested in gold investment to understand the specific types of gold investment and really consider carefully, before making an investment.

    For example, how much money do you spend to save and insure gold, if you will invest in physical gold? You also need to know the news that has the potential to make a big difference when it leads to the benefits that you will get.

    Read Also: 

    Leave a Reply

    Your email address will not be published.