Gold Investment - Is Physical Gold Safe and Worth It?

A detailed close-up of gold yuanbao objects, evoking the symbol of wealth and success in Chinese culture.

Gold preserves its value, resists inflation and delivers real returns. In times of crisis, physical gold is a portable, universally accepted store of wealth.

Why should you buy gold?

Thousands of years of history confirm that gold reliably preserves its value over the long term. Physical gold is an outstanding vehicle for wealth preservation across generations. It resists inflation and even provides a modest real return above the rate of price increases. In times of crisis, gold stands virtually alone as a store of value that is both portable and easily exchangeable anywhere in the world.

Gold is one of the best assets you can pass on to your children and grandchildren. Who would not want to give them a head start in life? For this purpose, it is worth setting aside gold through a regular savings plan, either in the traditional form of bars and coins, or through a gold savings account backed by physical metal.

Because the real value of pensions is widely expected to decline due to demographic pressures, it also makes sense to plan ahead for your own retirement. Gold savings are an excellent solution for this purpose as well.

When is gold a safe investment?

When considering a physical gold investment, it is worth first deciding whether you intend to hold your gold over a longer horizon of 10 to 20 years, or whether you are buying with the explicit aim of passing it on to your heirs.

Over shorter periods, gold can move 14-16% in a single year, and if you need to sell within, say, 12 months because you require the cash, you could easily be forced to realize a loss.

Over decades and longer, however, gold reveals its extraordinary properties.

The chart below from the World Gold Council illustrates this clearly. In 1922-23, the German mark collapsed entirely (first blue line). The Great Depression and the Second World War wiped out every major currency except the dollar and the pound. In the post-1970 fiat money era, every developed and emerging-market currency has been on a sustained downward trend against gold.

_Source: World Gold Council_

This raises a question worth considering: how safe is it to hold your wealth exclusively in currency-denominated assets?

The chart above answers that as well: if you hold dollars, euros or Hungarian forints as cash in a safe or in a bank account earning 0% interest, their purchasing power will be all but destroyed over a few decades, while gold retains its value.

US Dollar and Hungarian Forint vs. Gold - What Does History Tell Us About Preserving Value?

1974 1 ounce of gold: 43 dollars 2019: 1 ounce of gold: 1,280 dollars The dollar's loss in value: 96.64%

1946: 1,000 grams of gold: 13,210 Ft 2019: 1,000 grams of gold: 12,120,000 Ft The forint's loss in value: 99.89%