Since the dawn of time, gold has a reputation for turning heads. And yet, for a thoughtful investor, nothing is further from the truth! Indeed, nowadays, gold is primarily considered as a safe haven. Moreover, the importance given to this concept is inseparable from the debate between the purchases of gold in physical or paper form. In addition, whatever form you choose, we will see that there are multiple methods to buy this gold, each with its strengths and weaknesses. Here are the things that the Gold buyers Sydney should be aware of:
Why buy gold?
Unlike stocks or bonds, owning gold does not generate any annual income. So, as an investor, why take an interest in this precious metal? To answer this question, one must first understand who is buying gold and why. Three categories of buyers are represented:
- About 50% of the demand comes from the jewelry industry; gold being used as a raw material for necklaces, bracelets, rings, etc.
- About 40% of demand comes from individuals and central banks; gold being stored with a view to preserving value, in particular to protect itself in the event of loss of confidence in currencies
- About 10% of the demand comes from industry; the physical capacities of gold being sought after in the aerospace industry, electronics, the medical sector, etc.
On the supply side, the extraction capacity of gold companies is the most decisive criterion, with the largest mines located in South Africa, China, Peru, Australia and the United States. As with all commodities, the price of gold reflects the meeting between demand and supply. However, in addition to its “natural” demand, gold is also considered a safe haven, which contributes to the development of its price.
The rule is this: when confidence in the economy crumbles, the price of gold is very likely to rise, and vice versa. Under these conditions, we should not make the mistake of believing that a safe haven is a security immune to risk. However, compared to the oil market, it is true that the volatility of gold is light years away, but still very present. For example, between September 2012 and December 2013, the kilogram of gold dropped from $ 44,000 to $ 28,000.
Conversely, it appreciated from $ 33,000 to $ 47,000 between September 2018 and February 2020. For an investor, gold is therefore often used to diversify a portfolio, in order to hedge exposure to inherently unstable equity markets. But it can also depend on the type of gold purchased! Indeed, physical gold (ingots, coins, jewelry, etc.) or paper gold (trackers, certificates, shares of mining companies, etc.), the many methods available to buy gold each have marked specificities.
Buy physical gold
From the 1 kg ingot to the 10 gram ingot, through the ounce and historical coins, physical gold takes many forms and thus adapts to all budgets. The main advantage of physical gold is that it can fit in the hands of the investor, no matter what, even the darkest circumstances. Indeed, physical gold is a tangible asset which in the event of very strong upheavals in the economy, retains its value and even tends to appreciate. Physical gold is therefore considered the ultimate safe haven.