Why (not) invest in gold?

The price of gold has quadrupled in the last eight years. This year, the price per troy ounce is reportedly estimated at up to $ 2,500.

At the beginning of May 2012, gold traded at a price of $ 1,662 per troy ounce, with a troy ounce equivalent to 31.1 grams. Much has been written about gold. Let us review the main pros and cons of investing in gold.

The table above shows that the price of gold began to rise sharply after 2007. The value of the troy ounce increased by $ 197 between 2007 and 2008. Since then, a similar pace has been maintained.

Golden bubble

Opponents, who see only an inflated bubble in gold, often see the main arguments for avoiding gold is that the price of gold has tripled in the last five years, while the dollar has not lost two-thirds of its purchasing power over the same period.

The price of gold already includes the expectation that paper currencies, led by the dollar and the euro, will continue to lose purchasing power, says Traxler. According to this logic, it can be expected that for an ounce of gold worth $ 1,800 it will be possible to buy roughly the same as for $ 600.

What can you buy for a lump of gold?

On the other hand, there is another argument. He compares that in 1908 it was possible to buy a car for 1300 grams of gold. One hundred years later, ie in 2011, it was also possible to buy a car for the same amount of gold.

This argument is based on the fact that while the value of gold remains unchanged, only the value of the money that can be made for gold changes. However, this consideration gets a rift at the moment when you really want to buy a car for 1300 grams of gold. Calculated according to the current exchange rate, where one troy ounce corresponds to the value of 1558 USD, while one US dollar was 19.86 crowns at the time of writing this article, according to the Czech National Bank. with a very rough conversion, you have a sum of 1.28 million crowns, for which you can buy several cars.

Gold as an anti-inflationary bloc

Gold has another important property. Globally, it is a great store of value savings. According to some financial analysts, it is advisable to have a quarter to a third of assets in gold. However, he scrubs this claim because gold is not very liquid. Respectively, despite its good qualities, such as the already mentioned holding of value, it cannot be sold in a relatively short time.

Here we come across the second thing and the fact that it is appropriate to buy gold in its physical form, preferably in the form of investment ingots. If you own such gold, it is advisable to store it in your own safe before leaving it somewhere in the bank safe.

Among gold lovers, there are the most mischievous people who believe in conspiracy theories. In this spirit, holding gold certificates seems quite pointless. Gold is always good to keep in its physical form.

If you want to be truly independent, you should not entrust the safekeeping of gold to banks. Even though they have impenetrable safes, there is still the political will to order the purchase of this commodity at a predetermined price. Needless to say, the directive’s price will not correspond to the current price on the markets.

Status Good Delivery

If you decide to buy gold, you should only buy one that is marked as “Good Delivery”. This mark informs the buyer that the gold is accredited by the LBMA, which provides a guarantee that the gold sold will be of the highest quality.

There are several sellers in the Czech Republic who sell yellow metal with this designation. Abroad, it is common for gold to be sold in the “Good Delivery” mode by the foundries and mints themselves. However, no such entity operates in our country. When buying gold from a seller, expect a higher price than will be on the commodity exchange at that time. The difference is due to the several percent margin that traders charge for each purchase or sale.