Gold was the first form of money, and it is still the safest financial asset in history. Investing in gold is the best way for regular people to protect their purchasing power and pass wealth from generation to generation.
Unlike other hard assets like real estate or land, gold generally can't be destroyed - it also doesn't require maintenance or property tax. On top of this, gold is one of the few assets that can actually appreciate in value if the global economy collapses. Every investor should allocate a portion of their portfolio to physical gold and other precious metals.
Gold vs. Cash
Unlike traditional paper currency, gold cannot be printed by a central bank or government. This is really important because governments around the world are saddled with debt. And eventually, they will have to pay back their creditors. Most likely, governments will be forced to print more money, and this reduces the value of the money currently in circulation.
Over time, inflation slowly eats away the value of paper money and destroys the value of people's savings. This is why gold is the best way to store wealth.
While the value of paper money slowly depreciates over time due to inflation, the value of gold increases over time. From 1980 to the present, the value of gold in British pounds has increased over 800%.
Cash held without interest for that period of time would be worth less than half.
Gold also protects investors from the geopolitical and economic uncertainty that can harm both regular currencies and traditional investments like stock and real estate. Precious metals are safe-haven assets, and this means demand tends to increase when unexpected or bad things happen in the global economy or political system.
Unlike other assets, gold is not backed by a government so the metal doesn't depend on government stability to retain its value.
The United Kingdom's Brexit vote is a recent example of gold's ability to protect investors from unexpected events. While Brexit crushed the value of the British pound, it sent gold prices soaring. Gold investors are able to protect their wealth from unexpected bad news like war, political turmoil, and even recessions. No other asset is this safe.
How to Invest in Gold
There are three primary ways gold investors buy gold: physical metal, gold exchange-traded funds, and mining stocks. But physical ownership is the best and safest way to invest in gold because it is the only way to have full control of the asset.
Gold-based ETFs are convenient, but they can also come with heavy management fees that make them underperform the gold spot price. It is often speculated that many of the ETFs do not actually hold enough metal to redeem all the ETF holders. On the other hand, mining stocks can provide good returns when gold is doing well, but these companies are often badly managed and saddled with debt. Investors in mining stocks are exposed to a host of company-specific risk factors (like nationalization of the mine) that physical gold investors don’t have to worry about.
Physical gold is the best option. And investors who chose to buy physical gold can chose between bullion bars and coins.