Are gold investments safe?

Investing in gold has a long tradition and history. Is it profitable to invest in gold? And if so, how to do it?

Investing in gold and profit

From an economic point of view, investing in gold can be more profitable than other forms of investment. Investing in gold is obviously different from investing in so-called productive capital (for example, company shares). Unlike investing in stocks, gold does not generate added value as investing in company stock does through innovation, research or development. Successful companies create value by engaging in profitable business activities, which in turn enables them to provide dividend returns to investors. However, shareholders take a business risk and in the worst case scenario, they can lose all their capital. Which is completely out of the question when investing in gold.

"Owning gold" means owning it in its pure form - unlike owning any fixed rate bond - there is no third party and no risk of claims against it. Gold carries no entrepreneurial risk and will not become worthless. Conversely, with bonds, it can be argued that the worse the credit rating of the issuer, the higher the interest that will (should) be paid. Thus, gold can be considered the issuer with the highest creditworthiness and credibility without the possibility of bankruptcy.

Historically, the total share of gold in circulation tends to increase only in line with and in proportion to the economy. This is another reason why gold remains a stable asset whose purchasing power has not declined over the years.

Gold is a serious long-term investment, suitable not only for periods of hyperinflation and banking crises. Its historical importance, along with its limited supply, makes buying gold a very popular hedging strategy in the face of rising inflation, especially when interest rates do not compensate for the loss of purchasing power of the currency. Of course, as always when investing, the following rule of thumb should be followed: "Never put all your eggs in the basket." However, as part of a balanced portfolio, gold can serve as an excellent insurance policy with interesting diversification properties. There are few investments in human history that have proven themselves over millennia. To completely dismiss gold as an investment is to be ignorant of history.

Who can invest in gold?

Anyone can invest in gold. The simplest way is to buy gold bars. You can buy bars in banks - just like in the case of currencies, each of them has its own buying and selling rates for gold. You can also buy bullion on the stock exchange, but the procedure for withdrawing metal from the market is complicated and cumbersome. It is also possible to buy from individuals, but this is extremely risky.

Advantages: it's real physical gold that you can touch and store in your safe, safe deposit box and anywhere else. And the entry threshold here is quite small: you can buy a bar weighing just one gram. You can take the bullion to the bank, but the cell will charge a fee for lending it out. The bank will also charge a hefty commission for reselling the bullion.

Gold investment coins - These can be bought from banks, numismatic shops and auctions. Coin prices are determined by the value of gold on the London ICE exchange. They usually look nice and can be a cool gift. As with bars, this is tangible gold. However, you don't have to pay VAT when you buy the coins. Some rare series have additional numismatic value.

An ETF (Exchange Traded Fund) is a mutual fund listed on an exchange. Its quotes are linked to the assets in the portfolio. Gold ETFs have gold as their only asset, so their shares follow changes in the market price of the metal. You can easily invest in gold without having to physically buy it or worry about storing it. Trading in ETFs is the same as regular securities. The risk is much less as compared to futures trading.

Precious metals mutual funds - Investors buy stocks and mutual funds (PIFs) invest in "gold" instruments: shares of gold mining companies, unidentified metal accounts and futures contracts. Therefore, mutual fund quotes rarely follow the dynamics of gold prices. It is up to the fund manager to decide exactly what to invest in to get the best return.

More about gold investment at https://mennica-krakowska.pl/pl/blog/Inwestycja-w-zloto-wady-i-zalety/4.