Investment Gold

Unlike other assets, gold has maintained its value throughout the ages. Not only has it always been used in jewelry and art, but it is also a medium of exchange and one of the most established forms of investment. People tend to see gold as a way to preserve their wealth and pass it on from one generation to another. As an investment asset, gold is driven by several macroeconomic factors, such as the movement of currencies, inflation, and U.S. economic data, and has several major benefits.

Unlike other assets, gold has maintained its value throughout the ages. Not only has it always been used in jewelry and art, but it is also a medium of exchange and one of the most established forms of investment. People tend to see gold as a way to preserve their wealth and pass it on from one generation to another.
As an investment asset, gold is driven by several macroeconomic factors, such as the movement of currencies, inflation, and U.S. economic data, and has several major benefits.

Precious Metals Guide

Unlike other assets, gold has maintained its value throughout the ages. Not only has it always been used in jewelry and art, but it is also a medium of exchange and one of the most established forms of investment. People tend to see gold as a way to preserve their wealth and pass it on from one generation to another.

As an investment asset, gold is driven by several macroeconomic factors, such as the movement of currencies, inflation, and U.S. economic data, and has several major benefits.

Investment Gold | GOLD AVENUE

A beginner's guide to gold 

<div class="highlighted-blue-line">Gold is considered a hedge against inflation and a store of value through thick and thin.
Gold adds diversity to your portfolio, balancing out the volatility of riskier assets, including stocks and cryptocurrencies.
Investors typically view gold as a safe haven during times of political and economic uncertainty.
For beginner investors, pricing the market can be tricky.The Dollar-Cost Averaging strategy can help you buy gold at the right time.</div>

Key takeaways 

<h2>How does investment gold work?</h2>
For a wide variety of investors, gold is often seen as a way to protect their hard-earned wealth, save for retirement, or simply store money in an asset that is historically less vulnerable to potential bank failures or economic turmoil.
But investing in gold has not always been as easy as it is today. Buying gold as an investment only really took off in the 1970s, when the United States made it legal to trade in gold coins, bars, and certificates. Up until 1974, Executive Order 6102 had made the possession of gold illegal in the US.
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<h3>Why buy gold as an investment?</h3>
There are many reasons to buy gold as an investment, but here are the main ones, according to investors:
<ul><li>“Gold is a hedge against inflation”. This means that it protects you from the decreasing purchasing power of paper currencies.</li><li>“Gold’s value is unlikely to ever go to zero”.</li><li>“Gold is very rare and finite”.</li></ul>
The most direct way to own gold is to buy physical gold bars or coins. Depending on your investment strategy, you can also choose to invest in paper gold (i.e. Exchange-Traded Funds and futures contracts), or digital gold (read more about them below).
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<figure style="text-align: center;"><img src="https://assets.goldavenue.com/uploads/redactor2_assets/images/827/dca.jpg" data-image="827" alt="Cartoon hands against the green background holding dollar gold coins as part of a scheme showing the working principle of the dca strategy." width="453" height="320" style="width: 453px; height: 320px;"></figure>
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When buying physical gold, two questions often arise:
<ol><li>How much of the precious metal to buy? In general, the amount of gold to be held in an investment portfolio largely depends on one’s income, risk appetite, and investment goals. Beginning investors with moderate budgets tend to start with smaller products like 50g gold bars, 1 oz gold bars, or even 1 g gold bars.</li><li>When is the best time to do it? Choosing the right time to buy can sometimes be tricky for new investors: predicting the market, and especially the price of gold, is not that easy as it can be influenced by multiple factors at the same time. However, there’s a simple strategy — the DCA strategy.</li></ol>
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What is the DCA strategy?
It stands for Dollar-Cost Averaging, and it’s a commonly used strategy by investors looking to protect themselves from market fluctuations. It means buying a certain amount of an asset at regular intervals, regardless of its price.

By choosing to buy at regular intervals like days, months, or years, without taking price variations into account, the DCA strategy can help reduce the risk of buying at the wrong time.

In effect, the DCA strategy removes much of the detailed work of attempting to time the market in order to make the best bet.</div>
<h3>Where can I buy gold?</h3>
You can buy physical gold at several places, including physical gold shops, online gold dealers, or banks. Each of them has certain benefits as well as drawbacks that have to be considered before choosing the place that works best for you.
1. Physical gold shops usually charge higher premiums because of their specific costs (commercial rent, storefront costs, on-site storage, commercial insurance, etc). But with physical stores, you might be able to see your products before buying (if they have them on-site).
2. When evaluating online gold dealers, there are some factors to keep in mind:
Price transparency: do they give a clear price breakdown, and does it seem like they might charge any additional fees?
<ul><li>Storage: do they have a simple and transparent storage solution that includes free storage?</li></ul>
<ul><li>Insurance: do they insure your stored products and/or your deliveries, and at what level?</li></ul>
<ul><li>Buyback: do they offer to buy back your stored products and do they charge a commission?</li></ul>
<ul><li>Customer service: is their customer service directly available on their website and can you talk to a person or only to a chatbot?</li></ul>
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3. Finally, when buying at your local bank, consider contacting them beforehand to make sure they have gold products in store. Also, buying precious metals from a financial institution often comes with additional costs, including storage and insurance fees.
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<h2>Physical gold Vs. other investments</h2>
Unlike many other investments, physical gold has always been viewed as a safe-haven asset. Investors buy physical gold to protect themselves from various economic risks such as inflation and devaluation of paper currencies and to balance out riskier assets in an investment portfolio.
Not all asset classes carry the same risks. For example, riskier assets, including equities, futures, or cryptocurrencies, are often characterized by significant price volatility, while long-term assets, like gold, will usually retain or increase in value during times of market turbulence.
In any case, each asset plays a unique role in an investment portfolio, and, to see what works best for you, it is first important to understand the inherent risks in any investment type, and weigh them against your resources and investment goals.
Let’s see how physical gold works compared to other investments, such as stocks, cryptocurrencies, traditional savings, or other gold-related assets.
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<h3>Gold Vs. Stocks</h3>
Unlike stocks, which are often associated with bigger gains but also bigger risks, gold is perceived as an asset that can better withstand periods of crisis, market fluctuation, and inflation.
As an investment, stocks have certain benefits — they are pretty liquid and give you the potential to earn dividends.
However, the stock market can be pretty volatile, so returns are never guaranteed. In certain periods, gold has outperformed stocks. For example, from 2005 to 2020, the price of gold has increased by 330%, while the Dow Jones Industrial Average increased by only 153% over the same period.
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<figure style="text-align: center;"><img src="https://assets.goldavenue.com/uploads/redactor2_assets/images/797/gold_vs_stocks_2005.png" data-image="797" alt="a graph showing the gold price outperforming stocks between 2005 and 2020"><figcaption>A graph showing the gold price outperforming stocks in 2005-2020</figcaption></figure>
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<h3>Gold Vs. Cryptocurrencies</h3>
As we’ve shown, gold is often used as a hedge against more risky and volatile assets such as cryptocurrencies. 
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<figure style="text-align: center;"><img src="https://assets.goldavenue.com/uploads/redactor2_assets/images/798/bitcoin_gold_balance.jpeg" data-image="798" alt="Plastic yellow gold coin and orange bitcoin token placed on scale against the pink background to compare the similarities and differences between gold and bitcoin." width="461" height="345" style="width: 461px; height: 345px;"></figure>
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Bitcoin is the world’s most popular digital currency, often touted as a potential replacement to physical gold as a store of value. But gold and bitcoin are fundamentally different assets. 
It’s true that they share certain similarities in essence, as they both have limited supply and play a role as alternatives to paper currencies. The price of bitcoin (and other cryptocurrencies) as well as that of gold, tend to be influenced by different economic factors and can respond differently to the same market changes, risks, etc. Therefore, gold and bitcoin are not behaving as similar assets and are not necessarily competing against each other.
So, rather than seeing gold and bitcoin as substitutes, they should be perceived as complementary assets in a well-diversified portfolio.
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<h3>Gold Vs. traditional savings or investments</h3>
There are many forms of traditional savings, the most famous being simply keeping your money in a savings account, or even as cash in the bank or in paper form somewhere at home. While some other traditional investments such as real estate or gemstones, which are known to also retain their value quite well, are also used by investors to store their wealth for the long-term, sometimes even for several generations.
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<figure style="text-align: center;"><img src="https://assets.goldavenue.com/uploads/redactor2_assets/images/828/gold_sign.jpg" data-image="828" width="432" height="324" style="width: 432px; height: 324px;" alt="how much gold, etfs, stocks, bonds, mutual funds should an investor have in his portfolio"></figure>
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While gold is easily seen as a way to store and transfer wealth from one generation to another, it is not always thought of as a form of savings or even long-term investment. 
But as we’ve seen, these are precisely what can make gold interesting in the long term. With its long history as a safe haven and a store of wealth, gold is very much a form of savings that has for example held its value in the past compared to major currencies (be they in a savings account, in cash, etc.). 
Let’s see what are the main advantages of gold compared to other traditional assets:
Cash: because of their liquidity, cash savings have always been quite popular. However, cash savings do not carry any interest and are therefore fully exposed to inflation and possible currency devaluation. This means that if inflation hits, or if a country decides to lower the value of its currency to improve the competitivity of its products on the global market, all cash held in that currency will also loose value. Gold, however, as a physical asset of its own, cannot be devalued by any national or international decisions, and its price is only set by the market. Some investors even recommend hedging against potential devaluations of paper money by keeping around 10% of an investment portfolio in gold. 
Savings account: indeed, a savings account is one of the most popular traditional forms of investment. Savings accounts are seen as a safer way to save money than cash, because they carry interest rates. Depending on your bank and your country, you will earn a small percentage, usually lower than 5%, of your savings every year. One of the major risks it carries, however, is that a rise in inflation (meaning a fall in the purchasing value of your money), can easily eat away at your savings. And if the inflation rate is higher than your savings account’s interest rate, your money will start losing some value. The gold price, on the other hand, tends to go up when inflation increases. 
Real estate: real estate has become a popular investment vehicle over the last 50 years or so. And in some cities, real estate prices have tended to go up. However, no matter how stable this asset might seem, real estate is not crisis-free, and prices are not immune to reaching bubble levels, as we have repeatedly seen in the past. And compared to gold, real estate is a rather illiquid asset: this is simply because properties take time to buy and sell, and often can’t be sold easily and quickly without a substantial loss in value.
Gemstones: like gold, gemstones are historically seen as a store of wealth that can be passed on from one generation to another. However, there’s no regulated market for gemstones, which means that the income from selling them ultimately depends on how much a potential buyer is willing to pay. Also, with gemstones, there’s no guarantee of an increase in value.
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<h3>Gold Vs. gold-related assets</h3>
Just like with any asset, when the gold price goes up, investors take notice and start looking at ways to buy.
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<figure style="text-align: center;"><img src="https://assets.goldavenue.com/uploads/redactor2_assets/images/829/yellow_ingot.jpg" data-image="829" width="443" height="295" style="width: 443px; height: 295px;" alt="a 200g physical gold bar on the yellow surface"></figure>
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While physical gold remains the best way to invest in gold, particularly for non-experts, you might have already heard of other gold-related assets. These are ways for investors to buy in an asset that will somehow track the gold price without buying physical gold itself.
A question one might ask is which would be the best to buy between physical gold and other gold-related assets such as paper gold, mining stocks, digital gold, or even other precious metals?
Paper gold: there are two main types of paper gold — exchange-traded funds (ETFs) and gold futures.
<ul><li>Both have certain advantages, such as a rather high-level of liquidity and the absence of shipping and delivery costs,</li><li>As an asset, paper gold can be useful for investors looking for a short-term exposure to the gold price without having to buy the actual physical metal. </li><li>But paper gold also have risks, like sometimes high volatility and counterparty risk, which makes them assets usually reserved for more experienced investors.</li></ul>
Mining stocks: mining stocks are often used as a way for investors to earn dividends related to the gold price, because they function like any other stock.
But their value is not only based on the gold price because it is also directly attached to a specific company. It will therefore vary depending on the company’s financial health, local or international regulations on mining, and other economic or even geological events.
In the short term, mining stocks have sometimes outperform gold, however, over the long run, physical precious metal tends to outperform gold miners.
Digital gold: digital gold is a relatively new field in gold investment, which tries to combine the attributes of cryptocurrencies and physical gold.
To put it simply, digital gold is a digital token, or currency, that uses blockchain technology (just like cryptocurrencies) but that has its full value backed by actual physical gold.
While this gold-backed digital asset is seen as an improvement over paper gold for many investors, many forms of digital gold remain a solely digital asset: in many cases, it is not possible to redeem your digital gold in physical coins or ingots when you’re ready to cash out.
However, some actors such as DGLD, which manages the DGLD digital gold token, have already working on a solution by allowing investors to buy physical gold on GOLD AVENUE with their DGLD tokens, therefore bridging the gap between digital and physical gold.
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<h3>Gold Vs. other precious metals</h3>
Among precious metals, gold usually is the number one choice among investors. However, silver, platinum, and palladium each have their advantages that could fit with any specific investment needs.
For example, silver has been increasingly growing in popularity due to its growth potential and high industrial demand, while platinum and palladium, thanks to their rarity, could also make an interesting choice depending on one’s investment strategy and risk tolerance.
In general, investors looking to diversify their precious metal portfolio should take a look at these four metals for their wide-ranging and complementary features.