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Which Method is Better to Invest in Gold

Which Method is Better to Invest in Gold?

Gold investment – It is now the era of great decline. Stocks, real estate, coins, and bonds are all falling in price. The only thing that goes up is the deposit interest rate. Even if the deposit interest rate goes up, it is now only around 2%. Considering the 5% increase in consumer price inflation, deposits are also negative.

Many of you who have bought a lot of stocks are probably looking for a safe haven. When you think of safe-haven assets, the dollar and gold come to mind. Today we are going to learn more about gold investment.

◆ Real gold investment, -15% as soon as you buy…

Gold steadily rises in price in inverse proportion to the depreciation of the currency. This is true not only of gold but also of all commodities such as silver and copper.

Gold is not in great industrial demand compared to other commodities. Less industrial demand means less impact from economic fluctuations, lower prices when the economy is bad, and stable values ​​at all times. This is why we invest in gold.

Although it is the same safe-haven asset, the dollar may rise or fall. On the other hand, you can understand gold as an ultra-long-term investment product that steadily rises little by little. You need to approach it knowing that it is an investment that looks ahead at least 10 years or longer, not days or months.

For individual investors, investing in gold can be a bit tedious. Because there is not much volatility. The current international gold price is around $1840 per troy ounce. It took roughly 13 years for the price of gold to double. During this period, the US Nasdaq index rose about 8 times, and Samsung Electronics rose about 6 times. In terms of raising money, investing in gold can be a bad choice. It is suitable for investors who want to be called up little by little while protecting their assets.

When it comes to gold investment, many people think of real investment. You buy real gold in the form of rings, necklaces, or gold bars in gold and silver stores. In fact, it can be seen as a zero-point investment in terms of financial technology. There is a ‘hand taste’, but the cost is too high. When you buy gold in real life, it costs about 15% in total, including 10% VAT and workmanship. In other words, if you actually bought $775,62 dollar worth of gold, you actually only bought $659,28 dollar worth of gold. It takes 17.6% more to become the main battle. It will take a long time for gold to rise by 17.6%. At the end of 2019, three years and five months ago, those who invested in real gold like this have now recovered their principal.

◆ ‘Safe assets plus safe assets’… When buying gold, buy it in dollars

Of course, the long-term upward trend in gold price does not necessarily mean that it will rise. When will the price of gold go up and when will the price of gold go down? Gold generally moves against the dollar. This is true not only for gold, but also for all commodities such as copper and crude oil. Among these, gold prices have a particularly strong tendency to move in the opposite direction to that of the dollar. To put it simply, when the value of the dollar rises, the price of gold falls. When the U.S. raises interest rates, the value of the dollar strengthens and the price of gold falls.

The international gold price based on the New York Mercantile Exchange fell 2.05% in April and 3.04% in May, reflecting the US interest rate hike. It is likely to drop further. The international gold price fell by 45.5% in 4 years and 3 months from $1,920.80 in September 2011 to $1045.40 in December 2015. At that time, the US economy overcame the global financial crisis in 2008 and the US Federal Reserve (Fed) started raising interest rates.

The opposite movement of gold and dollar poses a major concern for investors. It is a question of whether to buy gold, which is priced in the international market, in dollars or in won. In technical terms, it can be said whether to open a foreign exchange or to hedge a foreign exchange. Currency hedging eliminates the troublesome fluctuations in the won-dollar exchange rate and results in profits and losses purely according to the price of gold.

However, if you invest in an open currency product, the change in the value of the dollar is reflected in the price as well as the change in the gold price. Since the gold price and the dollar move in opposite directions, even if the price of gold rises, the actual rate of return may fall short of the rise in the value of the dollar due to a fall in the value of the dollar. Conversely, even if the price of gold falls, there is a possibility that the decline is small or there is a possibility of a positive profit.

In general, PBs (private bankers) have a strong tendency to recommend an open currency exchange. It is intended to hold the two top safe assets, the dollar and gold, at the same time. Since gold and the dollar act as a defense against each other’s price decline, it is advantageous to protect assets in the event of an economic crisis. It is a mindset to be less excited when others earn, but to be less broken when others lose.

Gold banking, which is handled by commercial banks, is a representative exchange-open-type gold investment product. The concept of piling up numerical gold in a safe called a passbook.

Gold banking is banking, not deposits. No interest or dividends are accrued. If you are looking for dividends, buying shares of a gold mining company is one way to indirectly invest in gold. This is because when the price of gold rises, the stock price of gold mining companies will naturally rise as well. As gold mining companies, the world’s No. 1 Newmont Gold Copper and No. 2 Berwick Gold are famous. There are also gold funds that collect these companies. Warren Buffett, the ‘sage of Omaha’, also uses this indirect investment method when investing in commodities. He has bought stocks in oil and gold mining companies after the coronavirus.