Is it still worth investing in physical gold? 

For thousands of years, people have looked to gold as a sound investment and store of value. Today, particularly when the economy is going through a downturn, there is political instability, or the stock market is volatile, many investors start looking to gold as an attractive investment option.

If gold isn’t part of your investment strategy, consider your existing portfolio and goals, and whether gold will make a good addition. Not only is gold a good way to diversify your portfolio, but it offers a number of other attractive benefits, including acting as a good hedge against rising prices when inflation accelerates. 

Understanding your particular investment goals, existing portfolio, returns horizon (short-term or long-term) and need for liquidity should all guide your choice in whether to buy gold and in what form.

If gold is the right choice for you, it is important to understand both how gold works and the various ways you can invest in precious metals. For example, you can purchase actual gold (i.e. gold bullion in the form of bars or coins), gold ETFs (exchange-traded funds), shares in gold mining companies, as well as digital gold. To make the most of your gold holdings, make sure you’re making the right choice for your specific needs.

Benefits of investing in gold into 2022

No matter what type of gold you choose to hold, there are a number of benefits of investing in gold in both 2022 and beyond.

Gold can act as a value safeguard during market dips 

Many investors view gold as a safe haven during extreme market dips and volatility, helping preserve the value of their wealth. For instance, during the 2007-2008 bear market, the overall stock market plunged dramatically, while gold increased in the same period.

Gold can act as an inflation hedge

Gold has historically been a sound hedge against inflation because its price tends to rise when the cost of living increases. Moreover, gold is seen as a good store of value, meaning that people may be encouraged to buy gold when they believe that their local currency is losing value due to inflation.

Gold offers protection against deflation

Deflation is defined as a period in which prices decrease, business activity slows and the economy is burdened by excessive debt. During such periods, many people choose to hoard cash. Historically, some of the easiest ways to hold cash have been in gold and gold coins.

Gold is a good choice during times of political uncertainty

During times of political uncertainty, many people turn to gold. For this reason, it is often called the « crisis commodity”. Its price often rises when trust and confidence in governments are low.

Gold demand is growing

Many emerging market economies are growing, with their citizens’ and governments’ wealth increasing, leading to increased demand for gold and a rising gold price. For example, in rapidly-growing China, gold bars are a traditional form of saving, and demand for gold has been steadfast. India is the second-largest gold-consuming nation in the world and has also seen increased gold demand over recent years.

Demand for gold has also grown among investors in developed markets. This is reflected not only in holdings of physical gold bullion but in the increasing number of investors in gold ETFs.

Gold is good for portfolio diversification

Savvy investors understand that a sound investment portfolio is well-diversified, meaning that the underlying assets do not all react the same way to economic and political events. The key to diversification is finding assets that are not closely correlated to one another. Gold has historically had a negative correlation to many stocks and other financial instruments, making it a good way to diversify any investment portfolio.

Gold is held by major financial institutions

Some investors may wonder whether gold still carries the importance in today’s society that it once did. To see that this is true, one need only look at the significant gold holdings on the balance sheets of central banks and other financial organizations, such as the International Monetary Fund. In addition, several central banks have recently added to their gold reserves, evidencing their faith in gold as a sound store of value.

Ways to invest in gold

There are a number of different ways to invest in gold. Choosing the right type of gold investment is very important, ensuring it aligns with your investment goals and liquidity needs, among other factors.

Physical gold

Gold can be bought in physical forms such as ingots or coins. Unlike stocks or bonds which may pay periodic dividends, physical gold bullion is not an income-generating asset. Instead, the return on gold is based entirely on price appreciation. Moreover, an investment in gold also carries unique costs, such as storage and insurance. 

Gold ETFs

Gold or silver ETFs (Exchange-traded funds) are trusts that own physical gold and silver, selling their shares that track and reflect the price of gold or silver. However, the investor does not own the precious metals and at no point can they redeem the physical gold or silver bullion.

Shares of gold mining stocks

For some investors, buying shares of companies that mine gold is their preferred route to tap into gold investing. It is important to note that the value of shares in mining companies are not only influenced by the price of gold, but by internal business-specific factors that relate to the mining company itself.

Digital gold

For investors who want to tap into the benefits of gold investing, but do not want the hassle of managing physical gold, and desire an alternative to ETFs, digitalised gold may be the right investment. 

Kinesis gold (KAU) and Kinesis silver (KAG) are digital currencies native to Kinesis, based 1:1 on physical gold and silver.

Some of the benefits of investing in digital gold with Kinesis include:

• Earn a yield: Receive a passive yield on all KAU and KAG held.
• Get instant access: Buy, sell, and trade digitised physical gold and silver easily.
• Send globally:  Send KAU and KAG globally, cleared in 2-3 seconds.
• Choose the amount that’s right for you: On the Kinesis Money platform, you can purchase any quantity of spot physical gold – starting from just 0.1 gram.

Gold investing in 2022 and beyond

Many wise investors will be looking to gold both in 2022 and beyond, as part of their balanced investment portfolios. Before you jump into gold investing, consider all the options available to you and whether they meet your unique investment goals and needs. If you’re looking for an easy and safe way to get started investing in gold, Kinesis Money can set you on the right path.

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This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.