In the past, gold was highly accepted as a currency, but its influence and value began to dwindle after the Second World War. The dream of the gold standard had waned as well, especially after the United States put an end to it in 1971. Does that mean gold is reduced to nothing but a meaningless relic? Not at all! To understand gold and its value, you first need to get past some common myths surrounding gold.
In this article, we will debunk three common myths about gold:
Gold Is Either Money or It Isn’t
Why bother getting riled up about this argument when they’re both true in several ways? In 2016, central banks and other major financial institutions accounted for about 9% of the demand for gold while 24% or so were from gold coins and gold bars. This means that a third of the demand for gold is from consumers that consider gold as money.
On the other hand, almost half of the total demand for gold came from jewellery. While donning expensive gold necklaces and bracelets is surely an indication that the wearer is wealthy, they’re not used as a form of currency.
The point is that it doesn’t matter whether or not gold is used as currency. You won’t see anyone paying for their groceries with gold nuggets, but you can surely exchange your gold jewellery for money. For this reason, gold is in between being a collectible and an actual currency.
There’s No Point in Owning Actual Gold
Does it make sense to buy gold and keep it? In truth, owning physical gold can be a hassle. For instance, buying a gold coin means you’ll have to pay a markup for the value of the metal that the coin has.
Then, when you already have the gold, you have a few choices – you could just stash it away in your house, but that wouldn’t be so smart. You may also invest in a safe or pay for a bank safe deposit box, meaning that you are already spending money for the privilege of being a gold owner. Because of this, at this point, owning gold is not as good as you might think it is.
However, being a gold owner would pay off in case there’s some sort of disruption to the global financial system that may happen during wars and other similar circumstances. Of course, no one would want that to happen, but just in case, you’ll be glad you have gold!
Gold Is a Terrible Investment
Gold as an investment – some love it, some don’t. The concern is that it’s a commodity that is not immune to extreme swings in price. However, there’s still a limited supply of gold, and it can be exchanged for cash easily.
People try to time the ups and downs of the metal, but this is hard to nail consistently. If you’re investing in this alone, then it may easily be a bad investment. Yet, another consideration to be made is that fear often drives people to choose ‘safe-haven investments’ that do not lose value in the worst situations. From this perspective, gold may do well while other assets may not.
There are indeed many myths surrounding gold, and it takes lots of understanding to get over them. It is best that you do your research first and then consider the potential risk factors and what you want out of it before deciding to make an investment. In the end, you will want to make a well-informed decision that will give you more returns!
When you’re ready to buy gold in Perth, WA, The Gold Nugget Shop is here to help you out. For over two decades, we have been buying and selling gold in Australia. Contact us today to know how we can assist you!