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5 Questions to Ask Before You Buy Gold

Before spending your hard-earned money on any sort of asset, it’s important that you’re well-informed so you can make sure it’s the best route f...

1 August 2022

Banc Content

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Before spending your hard-earned money on any sort of asset, it’s important that you’re well-informed so you can make sure it’s the best route for you. Investing in any type of asset can carry risk as well as reward, which is why you should consider asking exploratory questions before taking the leap.

To help you navigate the world of gold in more detail, we’ll look at just some of the questions you should consider finding the answers to before you become the owner of a precious metal.

Please be aware that this is not financial advice and is merely a guide.

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The pros and cons of buying gold

As with any financial decision, weighing up the pros and cons can help you to see the bigger picture and how your decision may impact your current and even future situation. When it comes to buying gold, being able to understand the opportunities, as well as the obstacles, can put you in good stead.

What are the pros of buying gold?

The first question most people turn to when making a decision is ‘what’s in it for me?’. When it comes to your financial situation, this is important so as not to leave yourself vulnerable.

Buying gold has often been pitted as a low-risk commodity because it has been seen to maintain its purchasing power over time. Purchasing power is a gauge of how much a currency supply can buy and is affected by factors such as inflation.

With that in mind, gold is often seen as a reliable hedge against inflation, as it historically has been proven to retain its value well. No country in the world links its currency to gold, which is why many people choose to put their money into gold at times when its purchasing power may be in decline.

Generally speaking, the value of gold doesn’t fall when inflation is rising, unlike money. However, there have been occasions where gold’s value has fluctuated in light of inflation, so it’s not a guarantee.

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What are the cons of buying gold?

Buying gold might sound like a promising way to protect your wealth, but it’s important to remember that nothing comes without its potential pitfalls. While gold may offer some protection against economic events like a rise in inflation, it doesn’t necessarily offer the earnings potential of other investment assets. For example, investment in stocks is high risk but could deliver high returns, providing capital growth and income.

In this sense, buying gold won’t necessarily increase your personal wealth, but could provide a method by which to diversify your financial portfolio.

Is gold better than paper money?

With what you now know about gold, the next question you may consider investigating is whether gold is actually a better option than paper money when it comes to spending and saving. After all, gold is universally recognized and accepted as a payment method; it’s valued across the world.

Paper currency used to be backed by gold, and this was known as the gold standard. The gold standard is a type of system by which the standard unit of currency is kept at the fixed value of gold. In 1971, the gold standard ended in the USA which meant that the US government was then able to print paper money more freely.

No one system is more suitable than the other, but what’s important is that the likes of gold and other assets can offer you an alternative method to limit your exposure to risk and volatility. Gold can be used as a means of exchange, providing a function to spend or save as you need, which is why it can be an attractive avenue to explore.

analysing financial information on smartphone

Should you buy gold or cryptocurrency?

If you’re hoping to find an alternative to government-issued paper money, cryptocurrency has most likely entered your radar. But before you buy cryptocurrency over a commodity like gold, there are a couple of things to note.

The argument of gold vs crypto is an interesting one, but it’s important to remember that cryptocurrencies can be hugely volatile and while they can contribute to high returns, they can also add a big risk to your portfolio. Gold is typically seen as a more stable opportunity, but it too can fall victim to fluctuations in the short term.

The likes of Bitcoin and other modern cryptocurrencies are still relatively young and unproven compared to options like gold, so it’s key that you’re well-informed on both and understand the potential investment risk before deciding which one is right for you.

How much does gold cost?

If you’ve decided that gold is a viable asset for your financial situation, it’s important to understand the cost of gold and what it means to buy physical gold, as its value is subject to change over time. This could impact your decision on the timing of buying gold bullion.

The price of gold is typically affected by demand and supply as it’s still a highly desirable precious metal. During large world events and crises, gold is seen as an even more viable and stable choice for investors and is often in demand when economies are on the downturn. You should also consider factors like inflation and interest rates, as these can play a role in the world of buying – and selling – gold.

In understanding how much gold costs, it can be helpful to turn to historical prices as they may offer further insights into the gold market and its potential future trajectory. Remember that making predictions can be difficult, but you may be able to make some assumptions along the way.

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How do you buy gold?

Being informed on the advantages and disadvantages of gold as well as gold’s characteristics compared to other options leaves you in a good place. When it comes to buying physical gold, direct ownership is one way of achieving even more confidence in your new asset.

For example, cryptocurrencies backed by gold offer a digital token with a claim on gold, while an exchange-traded fund enables you to buy gold through owning shares in a fund. Neither of these methods allow you to own the physical gold.

When you buy gold from Glint, you can rest assured that it’s physical, allocated gold bullion that is stored in a vault in Switzerland, with no token, fund, or bank sitting between you and the ownership of your gold. Wherever you choose to buy your gold, it’s important that you are dealing with a trusted and reputable seller.

 

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk-free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline. 

To learn more, visit our homepage or give us a call at +44(0)203 915 8111.

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