Lee Baker was not receiving many inquiries about gold investment before. Now it seems as if more and more clients are reaching out with inquiries about purchasing metal assets.
Physical gold can be an unsuitable investment due to its inflexible market conditions. Selling it requires finding a dealer willing to act as the middleman and incurs storage costs; making this less attractive than high-yield savings accounts.
It’s a speculative asset
Gold is an intangible asset whose value rests primarily on people believing that someone will pay more in the future, whereas an equivalent sum invested into productive economic activities such as businesses will actually appreciate in value over time.
Some purists, or “gold bugs,” hold onto the idea that physical gold will protect their wealth during an economic catastrophe, yet this view can be dangerously misplaced: inflation, wars, political unrest and COVID-19 pandemic can wreak havoc with financial markets.
As is the case when buying or selling physical gold, dealers make it hard to avoid being overcharged when purchasing or selling physical gold. They typically build in pricing margins to protect their profits much like car dealers do, leaving you vulnerable when making transactions like these. With more convenient investment methods such as ETFs or futures contracts available now, investing in physical gold coins could offer much lower returns.
It’s an unproductive asset
Gold has long been used as a store of value and currency, but it’s not really an investment. What keeps its value is people’s belief in it – which can be hard to dislodge – while people also desire owning gold because it serves as both status symbolism and ritual components in many cultures.
Not to be forgotten when considering investing in gold is its lack of production; any rise in prices relies solely on speculation from others that someone will pay more later. Therefore, investing your money in productive economic activities that yield higher returns should be prioritized over buying shiny metals such as gold. Stocks have outshone gold over every standardized period dating back thirty years; that should convince any skeptics into thinking otherwise.
It’s a poor hedge against inflation
Gold has long been considered an asset that protects against inflation. As its price typically rises when inflation spikes, investing in it can protect purchasing power and protect purchasing power in your purchasing power.
Gold may not be your only defense against inflation; investing in stocks and securities has proven more successful in inflationary times; plus you can diversify by diversifying across real estate or other physical assets.
Investors worried about inflation may consider gold an attractive choice as an inflation hedge as it’s not tied to one currency or market like fiat currencies and stocks are. Furthermore, gold provides an ideal safe haven in times of economic or market instability while acting as a hedge against rising oil prices – one key driver of inflation. But even with all these advantages gold may not prove as effective a tool as other assets in times of high inflation; in fact, it has performed worse than equities during previous episodes of high inflation – although still worth consideration as long-term investment strategy.
It’s a social construct
Gold has long been recognized for its unparalleled qualities as an asset store of value. Gold’s durable construction means it won’t rust or corrode over time, while it’s easily portable – characteristics which have made it a go-to investment during periods of economic instability.
But what gives gold its true worth? Money is a social construct; its worth comes from collective acceptance of it as currency. A bar of gold may seem worthless to you at first glance; but if someone else acknowledges its worthiness as currency for purchase of food and water.
Although gold may offer certain advantages as an investment vehicle, it doesn’t compare favorably with stocks over every standardized period since 1900. Selling physical bullion may also be expensive and inconvenient due to dealer commissions; plus additional expenses associated with shipping and storage will need to be factored in as well.
