Gold: Truths and Myths

Updated: Aug 2

Is gold a currency or a collectible? Why own physical gold? Is gold a good investment?

Myths and truths about gold, investment
Gold has cemented its position as a store of value throughout the centuries. Shutterstock.

Gold has been in use for thousands of years. It was coveted by civilizations for its beauty and scarcity. These characteristics made it desirable and appreciated, which over centuries cemented gold’s position as a store of value.

Up until the 1970s, the US dollar was backed by gold. In 1971 the US dollar was taken off the gold standard which changed the role of gold in the world. This has also changed as the financial markets became more sophisticated and investors had wire investment options. Nevertheless gold has an important role to play today in the global economy and as a way to protect your wealth.

it is advisable to buy gold as a way to protect oneself against steep financial collapse and rapid inflation. You shouldn’t put all your money in gold, but buying some and having it in case of a crisis is a good idea. In the long run, the price of gold versus the US dollar has steadily increased, making it not just an attractive investment, but also a prime asset for hedging against the inherent weakness of fiat currencies.

There are many myths about buying gold that it is important to clarify:

Is gold a currency or a collectible? The answer is that it is both. 47% of gold available today is used in jewelry and collectible coins, but these can clearly be sold quickly at a market rate to convert to cash. Gold has a clear market rate that is traded globally.

Why own physical gold? We view gold as a form of insurance if something bad happens locally or globally. War, for instance, is feared by nearly 50% of Americans, while a financial collapse worries about 45% of us. In either case, if fiat currencies, like the dollar, became worthless, your gold coin would suddenly have a lot more functional value anywhere in the world.

It doesn't make sense to have all your wealth in gold, but it's probably not a bad idea to consider owning some physical gold or silver. In countries where currencies collapsed like Argentina, Zimbabwe, and Lebanon, those who owned gold were protected and had access to their savings while the situation stabilized.

Is gold a good investment? The problem with gold as a short-term investment, of course, is that it is a commodity subject to often volatile and extreme price swings. But there's a limited supply of the metal, and, as noted above, it can be easily exchanged for cash. That makes it a physical store of wealth with a price driven by investor sentiment. Many people attempt to time the ups and downs of gold, only in this case, fear will usually drive the price of this precious metal higher.

To put a number on that, during the 2007 to 2009 recession, gold ended the period up around 20%. The S&P 500 Index, meanwhile, was lower by about 40%. Clearly, that was a good time to own gold! And for those who don't recall, there was a real fear at the time that the global financial system was on the verge of collapse.

The real question isn't whether gold is a good investment, but why you are buying it in the first place. If you are looking for diversification or a safe haven, then gold can play a vital role in your portfolio. You should, however, keep the percentage relatively small. On the other hand, if you are trying to time gold's short-term price swings, you're probably making a mistake. Aktagold helps you buy and store gold outside of your home market without having to go through the complicated process of opening foreign currency accounts abroad. By saving with Aktagold, you can protect your money from the risk of inflation, devaluation, or foreign exchange controls in your home country. Contact us to get more information and learn how to better protect your money.