Have you been considering investing in gold lately? Perhaps you’ve heard that between 5% and 10% of your investment portfolio should be set aside for gold investments, and are starting to look into your options. Or perhaps you are an experienced investor who is curious about the benefits of purchasing gold bullion.
We have a number of different forms of gold available at Global Bullion Suppliers including coins, bars, and rounds, from a number of different suppliers. But there are other ways you can invest in gold besides the physical forms, including gold exchange traded funds (ETFs), sovereign gold bonds (SGBs), gold mutual funds (fund of funds) which further invest in gold ETFs, and gold MFs (fund of funds) which invest in the shares of international gold mining companies.
With so many options available to you, why should you invest in bullion? What are the benefits? Let’s take a look.
While precious metals like gold may not be good for trading, they are great for investing. When investors purchase gold and silver bullion, they do so with the intention of making a long-term investment that should last for at the very least four years. Any lower and you’re not likely to make it worth your money. In fact, there are some people who will hold onto bullion for a lifetime or longer, passing their wealth onto future generations.
Here are some of the advantages of investing in bullion.
Gold and silver bullion may have reduced liquidity in comparison to equities such as ETFs, but this can actually be beneficial. Unlike stocks which are easy to sell impulsively, it actually takes time to sell physical bullion, which means that you are more likely to stick with a buy and hold strategy.
Another advantage is that there is no counter party risk involved in owning physical bullion; you own it in your possession at all times (in a safe, for example). In contrast an ETF (even those backed by physical metal) could collapse and then you’d lose all your gold. While you might argue that such ETFs are supposed to be backed by banks, a history financial crisis has taught us that they can fail in this regard.
If you purchase bullion in small quantities, there will be a higher premium, especially when it comes to coins or other unique items. But paying for premiums is partially offset by the fact that you would otherwise have to pay an ETF fee. In fact, if you were to assume an approximate 4% growth of gold and an EFT at a 0.49% fee, in about four years the physical bullion portfolio would overtake the ETF portfolio.
You can avoid paying high premiums for bullion by purchasing in bulk as we offer tiered pricing and savings based on quantity, or you could take a look at the items marked “Our Choice Product” on our website which come at lower premiums. Avoid bullion coins, which are sold at a premium because of their potential numismatic value, unless you are of course you are a numismatist who likes to collect coins.
Now that we’ve gone over why bullion is a sound, safe investment, let’s consider why gold is a good investment in and of itself.
Gold has a long-standing history of being viewed as a safe haven investment because it is a hard asset. This is in contrast to currencies like the U.S. dollar that are known as “fiat” currencies because they aren’t backed by anything except a government promise.
When fiat currencies start to weaken, many investors add gold to their portfolios in response, and consequently, the value of gold goes up.
Historically, gold tends to retain its value, even in an inflationary environment. In contrast, financial assets like currencies and stocks lose value because the purchasing power of those assets decline. Because of this, hard assets like gold are a popular hedge against inflation.
When people begin to worry that inflation will start rising, the demand for gold will rise in response.
Gold prices did great during 2019, and in the investment world, market sectors that have been rising tend to continue rising (known as momentum). If momentum traders continue to buy this precious metal, they will drive the price up even higher as buying encourages more buying.
When investors worry about various market and geopolitical concerns (i.e. the trade war with China), hard assets such as gold become popular investment choices. Though the outlook has been more positive of late, this could change depending on how 2020 progresses.
Many economists are predicting that there will be a recession this year or one by 2021. As mentioned above, in times of economic uncertainty, people choose to hoard wealth in a hard asset like gold. The more evidence that a recession is on its way, the more likely the worth of precious metals will rise.
If you’re convinced that gold bullion should be part of your portfolio, then visit our store for a range of quality products. Global Bullion Suppliers is a DNA dealer registered with the Royal Canadian Mint, meaning that we are a reputable source that you can trust.
One of our more popular products is the 1 oz gold maple leaf coin but you might also be interested in the 1 oz gold bar by PAMP Suisse. If you’d like to purchase in bulk we also have 100g gold bars available.
Not sure where to start? We’d be happy to walk you through our products and offer you advice based on our expertise in the industry. You can count on us to not only provide quality products but quality service as well.