Benefits of Gold

Benefits of gold

Benefits of gold

Simplicity

Gold has endured centuries as a mark of wealth and the many benefits of gold begin with its simplicity. It is indestructible, relatively scarce and cannot be manufactured. It is a refreshing alternative to the complex investment products in the headlines today.

Value

The gold price is still considerably lower than its previous high, back in 2011/12. This provides the opportunity to buy significantly more gold now, than 5 years ago, for the same amount of money.

Low Volatility

There’s a finite supply of gold in the world, which creates exponential price rises when demand increases. Production cannot simply rise to meet an increased demand, so the supply/demand dynamic naturally drives prices higher. This also reduces the risk of devaluation, as lower prices then quickly attract more, new demand, which will once again fuel price increases.

Provides Portfolio Balance

PHYS01_Animated_Gif_1_MPUOne of the most popular benefits of gold is that it’s deemed to be a safe product, which investors have always turned to, in times of economic downturn. Its performance is apolitical and therefore independent of any one country’s policy agenda. It’s therefore perceived to be a hedge for anyone at risk of losses to their property value, ISA, stock portfolio, bonds and pension.

History tells us that the financial world moves in cycles. In a period when one asset class performs well, another may yield losses. It is impossible, and far too risky, to try to call these exact cycles, by placing all your hard-earned money into one investment area.  Instead, any Independent Financial Advisor (IFA) will recommend spreading the risk across the various asset classes, shifting the percentage of each holding according to the current economic conditions.

This way, an investor always owns a variety of assets, so any falls in one area will hopefully be offset with a different asset, producing good returns over the mid-term and maintaining balance. Owning physical gold actually reduces the overall volatility of a portfolio. In these current, uncertain times, experts believe up to 20% of holdings should be in gold, with perhaps 5-15% in better economic times.

No Counterparty Risk

In its physical form, the holder has no risk to any counterparty. This is particularly relevant in today’s new financial world, where money is no longer even safe in a bank account. It also avoids the counterparty exposure that exists with investments in gold stocks, futures and options.

Tax Advantages

There are also great benefits of gold in it’sphysical form. There’s no VAT to be paid on investment gold. Also, unlike many other investments, there’s no Capital Gains Tax to pay on profits of UK Sovereign and Britannia coins, as they’re deemed to be legal tender. Tax relief of up to 45% is available on qualifying gold bars as part of a pension.

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Predictable Liquidity

Gold is an internationally recognised, and trusted, form of exchange and has been since ancient times. Therefore, the worldwide network of dealers can provide prices 24 hours a day for both coins and bars.

Great Heirloom

More than just a valuable investment, gold coins are part of the nation’s historical heritage and can be both beautiful and collectible. In fact, many gold investors and collectors take great pride in their coin portfolios, often preserving them within their families for several generations. This habit also contributes to a limited market supply, once again affecting gold’s value!

Beat cash in the bank

Investors worldwide are nervous about a possible new global banking crisis. The very fundamentals of banking have changed forever, with the perception of strength and safety now a thing of the past.

Several of our large high street banks are now partially nationalised. With interest rates and therefore savings rates, at all time lows, returns on bank deposits are negligible or even negative. Simply saving money in deposits is no longer the safe haven it once was.

Trust and faith in numerous major world currencies are at an all time low. Concerned savers and investors are seeking a new, more reliable store of wealth and many have turned to gold. Simply leaving your savings in the bank and burying your head in the sand will not safeguard the value of your money. Proactive savers are now moving some of their money into gold, to reduce their exposure to traditional currencies.

Daniel Fisher

Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.