More and more people are investing in gold in the face of the current financial situation that is sweeping the world. In fact, we are seeing a gold fever, of unprecedented magnitude, is infecting investors around the world who are rushing to buy gold as if there were no tomorrow.
And no wonder. Both the European Central Bank and the US Federal Reserve are taking measures to mitigate the current financial crisis that could damage irreparably the future of the euro and the dollar, taking with them all those who have savings in either currency.
Current gold demand levels “are the highest we’ve seen since 2009,” reports the prestigious BullionVault investor gold sales company. Without going any further, current investor demand for gold is estimated to have increased by 600%, according to data from Degussa, a major gold trader in Europe.
Even Goldman Sachs, the renowned investment bank, recommended a few days ago its clients buy gold to protect themselves from the current financial crisis caused by the Coronavirus.
Considering the uncertainty of the immediate future, any investor — or individual with little savings — should consider protecting their wealth by buying gold.
Moreover, investing part of our assets in gold in a situation such as the current one can not only provide us with security: it also offers a not inconsiderable projected return.
Indeed, everything points to the fact that the price of gold has just started an upward trend, the end of which could be years away. We are at a great historical moment to buy gold.
3 reasons to invest in gold today
1. The price of gold has risen in many financial crises
Gold is the safe haven security par excellence. It has been for hundreds and hundreds of years. When there has been an economic crisis, many times there has been an inverse correlation: the price of most assets falls, but the price of gold rises.
When money is afraid it flows into gold.
Let’s look at a couple of examples. During the 2008 financial crisis, we saw gold go from trading around $668 (late 2007) to above $1,880 (August 2011). An increase of +188% in just 4 years.
Even if we go further back in time and analyze gold prices in one of the great crises of history, the crash of ’29, we see that its price went from about $315 to over $675, also in a period of about 4 years.
The good news is that the bull runs in the gold price have never been overly rapid or immediate to the market “crash.” In other words: it seems that the train has not yet left and – if at this point you have not yet invested in gold – you may still be in time to benefit from the rise that the price of gold could experience in the coming months.
The intellectual and philosopher Aldous Huxley said that “Perhaps the only lesson that history teaches us is that human beings learn nothing from the lessons of history”.
Well, if you have read this far, right now you have the opportunity to learn from history and act accordingly.
2. Investing in gold protects you against currency devaluation (and both the euro and the dollar will devalue imminently due to Fed and ECB measures)
Gold–within its price fluctuations–has for centuries been one of the quintessential forms of storing value, a refuge from geopolitical inclemencies and hyperinflation.
The amount of gold on the planet is finite and a relatively small and predictable amount enters the market each year (the gold that mining companies manage to extract and refine).
Currently, in the midst of the financial crisis caused by COVID-19, we are seeing how the world’s major governments are adopting measures that will cause both the euro and the dollar to lose value.
Broadly speaking, the US Federal Reserve and the European Central Bank are opting for 2 measures that aim to prevent our economies from collapsing: Printing more money and applying quantitative easing measures (i.e. using the money just printed to buy their own debt and finance the bailout).
Printing More Money: The Shortest Path to Hyperinflation.
When you print more money to inject into an economy that is in agony what you achieve is to “dilute” the value of existing money, the value that has to be “spread” over more euros or dollars.
For every dollar that is printed, every dollar in circulation becomes worth a little less.
Wealth is not created out of thin air. If central banks print more money to inject it into society, our savings will soon be worthless: A loaf of bread that costs $1 today will be worth $2 tomorrow.
Whoever has more wealth in the form of money is, obviously, who loses the most. The printing of money, after all, is nothing more than a hidden tax that affects those who have the most money.
Washington Post columnist Steven Pearlstein summarized the situation in a recent article: “Debt monetization [i.e., solving the current financial crisis by printing money wildly] will be an extremely expensive feast that we will pay for in the form of hyperinflation, mass unemployment, and an epidemic of bank and business failures. Just ask the people of Argentina.”
And if you think that in Europe this scenario will not happen, you are dead wrong. The European Central Bank announced a few weeks ago that it would inject 750 billion euros into the European economy by buying and financing the debt itself, “clearing the way for potentially unlimited money printing,” Reuters reports.
Should you be worried about this situation?
If you don’t have any money saved up, of course not. They can’t take from you what you don’t have.
Now, if you have savings in euros or dollars… That’s another story. Or you “shield” your money by buying gold (or through other investments) or they will take away a part of your savings without you even realizing it.
How much will the euro and the dollar devalue? How much money will they take from us savers?
That remains to be seen. Luckily you may still be in time to protect your money from plunder by investing in gold, the quintessential refuge from hyperinflation and recessions.
3. Gold has enormous liquidity and you can invest in it without having to buy “physical” gold
Imagine for a moment that instead of buying gold to protect your wealth you decide to invest in real estate. The moment you seek liquidity and want to sell your investments you may require months to convert them back into cash.
With gold, you won’t have that problem: Gold (and its derivative products) have historically enjoyed enormous liquidity. You can always sell your gold, in whole or in part, in a matter of minutes.
In addition to the above, to invest in gold, you don’t need to physically buy gold bars and store them under the mattress or in a bank safe deposit box (with the added cost that this has).
You have very interesting solutions that will allow you to invest in gold in just a few minutes and without leaving your home. Let’s see it:
How can you invest in gold in a completely safe way and without leaving your home?
a) Buying gold through an exchange-traded fund (ETF) backed by gold bullion
Exchange-traded funds or ETFs are financial products somewhere between mutual funds and stocks. For practical purposes, an exchange-traded fund has the same function as a normal investment fund (it holds the value of an asset or a set of assets), but the advantages of stocks (they are quoted in real-time and have enormous liquidity).
When we talk about investing in gold the quintessential exchange-traded fund is the SPDR Gold Shares (GLD). This is an exchange-traded fund that was launched in 2004 on the New York Stock Exchange, whose value replicates the price of gold.
The most interesting thing about the SPDR Gold Shares (GLD) fund is that it not only replicates the price of gold: it is a fund physically backed by real gold bullion. In fact, this exchange-traded fund owns the largest private gold reserve in the world.
In fact, it is the largest fund backed by physical gold in the world, and many big investors make use of this instrument regularly (the tycoon George Soros, for example, has a certain predilection for investing through this fund).
In short, this fund allows us to invest in gold safely and in minutes, without having to worry about storing the gold purchased or spending money guarding and insuring it. In addition, being one of the largest exchange-traded funds in the world, with a volume of more than 50 billion dollars, it has enormous liquidity and we can always sell it in minutes.
How to invest in gold through the SPDR Gold Shares fund in minutes and safely?
The most recommended option we currently find for investing in the SPDR Gold Shares fund is through the broker eToro.com, an investment platform used by more than 10 million users, with headquarters in London and authorized by CySEC and the FCA (the UK regulator).
As soon as you have your account created, enter “SPDR Gold Shares” or the symbol “GLD” in the search bar above to locate the exchange-traded fund’s ticker and be able to invest in gold safely and securely in a few minutes.
b) Investing in gold by buying gold bullion held by private companies
Although investing in gold through the listed fund we have presented to you is an option with clear advantages over any other, you should know that there are more “classic” options.
Some investors, when they buy gold, want to have the possibility of physically “going to see” their gold, or even to collect it for safekeeping in their own safes.
If this is your case, you should know that there are other options for investing in more conservative gold that allow you the above: They are the gold traders.
One of the major gold traders in Europe is BullionVault (https://www.bullionvault.com/). This reputable platform offers 2 options: They can send you the bullion at your doorstep or custody it in their vaults in Zurich, London, Singapore, New York, or Toronto (in the latter case, there is a custody fee).
BullionVault is based in the UK, is registered with the UK government under number 4943684, and is part of the London Bullion Market Association (a leading association of gold traders, which ensures that its members meet high-quality standards).
BullionVault currently holds more than ¤2 billion in precious metals and has 75,000 users worldwide. In addition, all of its vaults are audited every day, to ensure customers that their gold is in safe custody.
As mentioned above, BullionVault customers can come to the company’s vaults to pick up their bullion whenever they wish.
How to buy gold in minutes using BullionVault
To begin with, BullionVault charges commission on both the sale and safekeeping of the gold you buy. However, BullionVault’s commissions are among the lowest in the industry: for the purchase of gold, they range from 0.05% to 0.5%, depending on the amount purchased.
As far as custody is concerned, BullionVault has a cost of 0.01% per month (0.12% per annum) on the value of the gold under custody. It is important to note that this custody fee includes insurance on the gold stored, so it is a very low amount to have the peace of mind that insurance covers our investment in gold.
The 2 options for investing in gold that we have seen in this article allow us to invest in this precious metal with total security and the highest guarantees. Using the exchange-traded fund seems to us to be a much more practical and suitable option for the vast majority of investors. If we opt for this possibility, moreover, we can have our investment made in a matter of minutes, as eToro.com–the broker recommended above– allows us to add funds by credit card or Paypal, among others.