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Pros and Cons of Investing in Physical Gold

Pros and Cons of Investing in Physical Gold

gold investment

Investing in physical gold may seem old fashioned, but it is the most time-tested and no-nonsense way of securing your future. Our ancestors have been investing in gold for ages. Recently, they have made it possible to buy gold in the form of cryptocurrency like you buy Bitcoin. This has opened new doors to investors who are worried about safeguarding their assets.

Pros of Investing in Physical Gold

1. Gold Will Never Lose Its Value

Gold is one of the rarest elements on the planet and it’s also very difficult to mine. The number of resources spent and risk taken to mine a single coin of gold is preposterous. Hence, it’s naturally a great investment for people who prefer simpler, old school methods of investment.

2. Best Way to Protect Your Wealth

This is one of the biggest reasons to invest in physical gold. No matter what the market condition is, your gold bars will always have a decent value. During the times of inflation, the price of natural resources like gold, silver and natural gas always goes up. So, investing your money in gold is even safer than mutual funds or buying stock.

Cons of Investing in Physical Gold

1. Its Value Doesn’t Go Up as Much as it Should

Buying gold may be the best way to safeguard your assets, but it is not a good business decision. If you are looking for investment options that will give you maximum returns then investing in gold is the last thing you want to do. To get maximum returns you also need to take higher risks and if you are ready to take financial risks, then why play safe? Invest in things like stocks, buy small businesses, buy cryptocurrencies, etc.

2. It Doesn’t Produce Anything

In a press conference for Berkshire Insurance, Warren Buffet famously explained how buying gold does not produce anything. When you buy an asset such as a farm or a business, you are buying something that is scalable and, with time, produces a lot of income. Warren Buffet gave an example of how he bought a farm of 500 acres in Nebraska 29 years ago by paying $700 per acre. He grew all kinds of crops on that land and later sold it for a much higher price.

But buying gold is not the same thing. You are merely hoping that prices will go up and you will get some profit. But this rarely happens and the profit margins are not significant. Same goes with buying things like art. An expensive piece of work or a painting might look great in your living room, but it does not produce anything. Plus you would need to find a buyer who might value it more than you do to turn any profit on it.

The Bottom Line

To conclude, investing in gold is a great way to protect your investment but not a good option when you are looking to profit from the investment. There are some countries like India, where gold has a lot of cultural value, that people buy it as a status symbol. But from an investor’s perspective, there are other, better, options available in today’s world.

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