Why invest in gold today?
Because when you invest in gold, you act like you would when you buy insurance for your house or car. You buy gold to protect the value of your estate. In this sense, it’s better to do it when you want to prepare for your old age.
Concretely, how does one go about buying gold?
There are two ways to get gold. Either we buy physical gold, like a gold coin, or we buy a piece of paper that tells us that we own gold. Buying physical gold is recommended because the investor is sure to have access to it when he needs it. One way to do this is to buy one-ounce gold Maple Leaf from the Royal Canadian Mint.
They are sold at authorized dealers and are accepted worldwide. But with physical gold, there is the disadvantage of the risk of theft. Hence the interest in paper gold, which can take the form of Exchange Traded Funds (ETFs) invested in bullion, such as the iShares Gold Bullion ETF of the American BlackRock, one of the world’s largest asset managers.
This solves the issue of storage and security costs.
And buying gold jewelry can also do the trick?
Jewelry is not ideal. In case of resale, the owner usually gets the gold value of the jewel, without necessarily finding the original purchase price.
Is it necessary to be already rich to invest in gold?
Not at all. Any saver, regardless of their level of wealth, can – and even must – hold gold in their investment portfolio, just as every homeowner has home insurance.
That’s because the assets we may hold – for example, the shares of a publicly traded company, or our home – are at risk today: they are expensive and are not immune to a sudden and lasting loss in value. Worse: if inflation were to start rising soon, the purchasing power of our savings would automatically start to melt away.
Gold, on the other hand, is highly correlated with inflation: when inflation rises, gold rises. That’s why gold is called “wealth insurance”. All it takes is 2% to 3% of our investment portfolio to be made up of precious metals like gold for our savings to start benefiting from this protection.
But then, you can’t really make a fortune with gold…
You don’t buy gold to become rich overnight. Unless you try your luck by acquiring shares in gold companies on the stock market: when the market is favourable, the gains can be spectacular – 10 times, 20 times your bet, or even more – but the risk is correspondingly high; many people who invested in mining exploration companies that promised the moon have lost everything.
Warren Buffett, the famous investor and one of the richest men on the planet, is a great gold denigrator. Why not listen to him?
Warren Buffett is in a league of his own, with a cash flow of over 130 billion US dollars. He played banker of last resort during the 2007-2008 financial crisis, which is certainly more profitable than buying gold bars and watching them shine. You have to understand that his financial strategies cannot be those of the average saver.
The price of gold is yo-yoing, with peaks in 1980, 2011 and 2020. Isn’t it risky to bet on it now? Especially since Vincent Delisle, Senior Vice-President and Head of Liquid Markets at the Caisse de dépôt et placement du Québec, recently stated that the value of an ounce of gold rose 18.5% in the first six months of 2020, only to fall 2.3% in the following six months?
Indeed, depending on the reference date chosen, gold is either going very well or looks bad. I don’t think that gold is overvalued at the moment; on the other hand, if we look at the shares listed on the stock exchange, we can see that the price-to-earnings ratio is currently at much higher multiples (25-30 times) than its historical average (about 15 times).
In other words, investing in gold in 2021 is much less risky than buying shares in the electric car manufacturer Tesla!
Source lactualite.com
Disclaimer: All articles published here are for information purposes only. They can in no way influence your investment decision. Only you can decide on the best possible investment for your money, and whatever decision you make will involve risk. The information or data included here may already be out of date and should be verified from another source, in case you decide to act.
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