Investing in Gold – the Why vs. the Why Not

For literally hundreds and thousands of years, gold was considered the apex denomination of currency that existed, notwithstanding princely jewels that only a few were fortunate enough to see in their lifetime, let alone owning some themselves. The common folk, the noblemen, and the royalty – all shared this belief that an investment in gold is the greatest and the safest investment there is. It made sense, considering the fact that the concept of gold-backed currencies exists even in the modern age. And, today as we write this piece for your benefit, the price of gold sits at SGD 5726 for a mere 100 grams. This is precisely why gold is seen as a legitimate type of investment – and some go as far as to store dozens of gold biscuits. There must be something to it.

Why Gold is a Great Investment

Historical context isn’t the only reason why so many genuinely believe that gold is a sound investment. While the value of gold has seen its share of fluctuations here and there, the fact remains that gold has always had some value, and that can’t be downplayed. And, so investors don’t necessarily mind investing in gold. It’s not hard to see why. Gold is a current asset, is tangible in nature and can be liquidated with ease. Let us expand upon that thought a little.

Gold = Insurance

Investing in gold is certainly a highly debated idea and there are some who are extremely critical of investing in gold. Here’s Warren Buffett dismissing gold investments: “It gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” Buffett and others don’t see the long-term advantage of investing in gold – be it in Singapore or be it in Siberia.

But (there’s always a ‘but’), they disagree with gold investments simply because of a philosophical disagreement. Buffett and some of the others who dismiss a gold investment dismiss it simply because they see it as an ‘investment’. When seen from that context, their dismissal does seem legitimate. But, that’s not how some advocates of ‘investing in gold’ think of it. They, instead, think of buying and storing gold as an effective means to avail of insurance. People love the idea of being insured – they buy life insurance, they buy car insurance, and they even buy home insurance in their bid to prepare for rainy days.

Some think gold belongs in this category. If one thinks storing, say, 10 thousand Singapore dollars’ worth of cash isn’t questionable; one can also extend the same logic to gold. Try to think of this as a means to diversify your portfolio. If you have stored 10,000 SGD worth of gold, that money will still stand with you even if you or your company suffers a financial meltdown of epic proportions. And, besides, now that we’re aware of the fact that demand for gold is now on a steady upward incline – at least in Asia – one ideally shouldn’t be as worried about ‘investing gold’ in Singapore.

Why Gold is not a Great Investment

Gold is bulky, it’s difficult to store and its price is too volatile for you to assume that it will invariably fetch you decent returns. But, leave even its volatility. The primary reason why many are so sceptical about the whole idea of investing in gold is that there are other, superior ‘investment avenues’ that are available to you. Other avenues that fetch you interest, which brings us to…

Gold is no Investment at All

Even if you store an entire kilogram of gold today, you can’t really be sure if that gold will be worth a significantly greater amount than it is currently worth, which makes it fair for some to question gold’s worthiness as an investment avenue of substance.

But, that’s simply because gold is not an investment at all. Come to think of it, gold offers you zero dividend, gold fetches you zero interest, and it won’t really protect you against the forces of inflation anyway.

Finally, there’s the matter of the additional costs that you are facing with an investment in gold. You have to deal with the vendor costs that may or may not earn their livelihood through that money. Beside that, you then have to worry about where you decide to store all that gold. You may need to invest in a quality safe or simply decide to rent a secure locker for the storage of all those biscuits or coins. That’s simply because gold is one of those commodities that are highly susceptible to a good old-fashioned robbery. And, that brings us to the final flaw that can be associated with a ‘gold investment’; you are at an increased risk of losing it all.

Investing in Gold

Have you decided to invest in gold? It’s important to do it right. Try to follow these pointers!

  • If you’re opting for gold bullion coins or other ‘collectable coins’, be certain of the coin’s ‘melt value’. The melt value refers to the basic value of a gold coin if we were to melt it down
  • For increased cost-effectiveness, try to seek an independent appraisal (that applies to the gold product you’re buying), which promises to be lower than that offered by a professional seller
  • Be sure that the quality of the gold you’re buying matches with that of the gold you intend to buy
  • Be sceptical of those sellers who tell you that ‘a risk disclosure is simply a formality’
  • And finally, don’t forget your receipt!

What’s our final verdict, you may ask. We simply believe this a matter of why you want to buy gold. If you want to think of gold as an investment – know that there are better investments out there. If you think of gold as insurance – go ahead; get the protection that you need.


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