Key points to consider when investing in gold
For millennia, humankind has recognised gold as a material of the utmost value – veins of it run through our history. Almost every civilisation, every empire has sought to extract, to amass and to display gold as a sign of wealth and prosperity.
Few materials have driven the same levels of interest, exploration and movement (gold rush), and, sometimes, hysteria.
While outward fashions might have changed, and the uses to which we put gold to use are many times more varied (critical in tech, medicine, automotives etc), one thing has not: that gold remains a metal people think is worth possessing.
It is generally held that in most major cities, the price of a bespoke suit has been the equivalent of an ounce of gold, and a week’s salary for a professional, although when Gordon Brown sold 12.8mn oz of the UK’s reserves at an average of $276 (£227) an oz in 2002, the suit would have been from Burton, not Savile Row.
In a modern market context, gold (and other precious or critical metals) can be a wise option to hold as part of a diversified, balanced portfolio – a hedge against turmoil.
While it is traditionally considered a safe haven that does not mean gold should be considered an automatic investment.
As a physical asset, it cannot be destroyed or accidentally erased by an errant click of a button or a solar storm. There is some comfort in the sense that it will almost certainly never be worth nothing (in our lifetime, at least). Governments cannot print gold. It has significantly outperformed currencies like the Italian and Turkish lira, the rouble and most of the LATAM currencies since the abandonment of the gold standard.
However, while it is traditionally considered a safe haven that does not mean gold should be considered an automatic investment. There are considerations to be taken into account – such as your personal risk appetite, and the type of gold asset to invest in.
The production of gold has often been damaging to the environment. It would be an interesting debate between the advocates of bitcoin, for which miners use the equivalent of the Netherlands’ electricity consumption to search, and the gold producers as to the relative carbon and other emissions generated.
Gold, as with anything, is subject to a degree of market volatility. The price will fluctuate so, as with any investment, timing is key. Having worked in mining finance for the past 25 years, funding gold and other metals projects in Africa, North and South America, Asia and Australia, I can outline what, as a new gold investor, might be useful to know and options to consider.