Gold as an investment

Gold is a useful instrument for diversifying and securing assets, but it lacks the steady yields which dividend- and interest-bearing securities deliver.

Gold is a popular safeguard against short-term inflation and stock market failures. The price of gold almost always climbs dramatically during stock market crises. However, gold only provides limited security against long-term inflation when this is accompanied by economic recession.

Like all other asset classes, gold is not a completely safe haven. Gold prices experience major fluctuations, partly because they are linked to the U.S. dollar, meaning rates are affected by the dollar’s performance as well.

Gold derivatives: The risk of issuer failure

There are numerous gold derivatives and gold certificates on the market. While these can be interesting investment products, it is important to understand that they are only backed by their issuer. If the issuer goes bankrupt, you may lose the money you invested.

ETFs and Gold Mines

Exchange traded funds (ETFs) can also be used to invest in gold index rates, and even have your gold physically delivered. If you buy gold mine shares, understand that you are not investing in gold itself but in the corresponding gold mining company – which carries additional risks.

Physical gold

Actual, physical gold is also a favored investment vehicle. Advantage: No risk of issuer failure. Disadvantage: Physical gold must be securely stored. You pay rental fees when you store gold in a safe deposit box at a bank, but benefit from the fact that the gold remains in your possession if the bank fails. Gold can be purchased as bars (anywhere from a fraction of a gram to 12,44 kilograms) or coins (the Maple Leaf, Golden Eagle or Krugerrand, for example).

Gold Vrenelis as an investment?

When buying the popular Swiss gold Vreneli (20 franc piece), pay attention to the fact that you often pay a markup for the collectible value of the coin on top of the gold price. For this reason, these coins should not be your first choice when looking to invest in gold rates.

More on this topic:
Tips for buying gold in Switzerland

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