They Buy Gold To Manage Risk & Promote Stability
One of the primary responsibilities of central banks is to promote the stability of a country’s financial system. To do so, they take various measures to ensure that a nation’s economy doesn’t go topsy-turvy when markets go awry.
One of these preventative measures is diversification, a risk-reduction tactic that involves building a portfolio made up of a healthy mix of assets that move in different ways. Should one asset weaken, the others can remain strong, and vice versa.
How about you?
You, too, can take advantage of the same type of asset diversification strategy as a country’s bank. It doesn’t have to be complicated or costly to get started. Just think about diversification like preparing a healthy dinner: the more food groups and colors on your plate, the more nutrients you’re consuming, the healthier you’re becoming, and the lower your risk for health problems. The wider the variety of assets in your portfolio, including gold, the stronger and healthier your portfolio can be!
Gold As An Investment Asset
Although the primary role of gold is as money, there is a widely-held view in modern financial academia and the investment industry that gold is an investment asset, like stocks or bonds, and that gold can be quantified by analysing its risk, return and price correlation with other financial assets. While its true that the gold price is not highly correlated with the prices of most other financial assets, BullionStars view is that gold should primarily be thought of as a form of money and as a form of saving.
If You Consider The Last 20 Years You Notice That The Rate Of Gold Has Increased Tremendously So I Hope It Will Increase In The Future Too
Gold can be used for more than selling. The 34-year-old Claims Auditor added: Its not just useful for selling but also to use as a collateral for a loan.
In India, gold loans are common. The process involves a customer pledging gold as collateral for taking a loan. The bank or the lender uses the gold as security against potential payment default by the customer. The loan amount sanctioned is a certain percentage of the value of the gold that has been pledged.
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A Safe Investment In The Long Run
The 35-year-old human resources freelancer added: I have invested in coins in the past and that helped me later. When my husband and I were in a dire financial emergency, we were able to use our gold before thinking of borrowing. I would suggest if you are not very keen on jewellery, at least buy coins. On any given day, I would prefer to spend my spare money on a gold coin instead of a latest expensive phone. I have always benefited from my gold purchases.
Using Gold For Commerce
In order to use your gold for commerce, you have to convert it to dollars. Thats right, dollars. The same currency that the gold sellers want you to believe will become worthless so that youll buy gold from them. But lets take that a little further.
Gold has Fees
Like Warren Buffet said, you have to pay people to guard your gold. They dont do that for free. You also have to pay a commission to buy your gold, and you have to pay a commission to SELL your gold and convert it to useable currency.
Heres a question to consider. Do the guys selling you gold, and buying your gold back from you, take their commission payments in gold? What do you think? If they believed their own hype, you would think they would be more than happy to, but they dont. You have to pay them in, wait for it, US. dollars! Why? Because they cant pay their mortgage and their utility bills with gold any more than you can.
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Gold As A Store Of Value
Gold retains its purchasing power over long periods of time despite general increases in the prices of goods and services. In other words, an ounce of gold today can be used to buy a similar amount of goods as it could historically. This is why gold is the ultimate store of value and a long-term inflation hedge. In contrast, paper/fiat currencies continuously lose purchasing power until they become completely worthless. Gold is a superior form of money vis-a-vis fiat/paper currencies.
In fact, golds purchasing power is constant over very long periods of time, a phenomenon which has become known as The Golden Constant.
Because the gold price adjusts to changes in the general price level, and thereby allows physical gold to retain its value, the gold price is closely monitored by financial markets and central banks as a signal of future inflation, sometimes called inflation expectations. This is why the gold price is often referred to as an inflation barometer.
Gold In Dubai Is Cheaper
If you are wondering if is gold cheaper in Dubai, the answer is yes! You can get the best prices for gold in Dubai
Dubai has always been favoured for its exemption from taxes. It is one of the main reason why people chose to move to the city, as well as buy gold. Due to the exclusion of taxes in the emirate prices for gold in Dubai have always been cheaper as buyers would only pay for the value of the gold jewellery. Although the introduction of the Value Added Tax in 2018 does levy a 5% tax on any items purchased, buying gold is still considerably cheaper in Dubai compared to other countries in the world. Also, tourists can claim VAT refunds in the UAE for all purchases made in the country.
VAT in Dubai is currently the only form of tax applied on any gold purchase. In other countries, for example, India, apart from VAT there are various other taxes such as goods and services tax and excise duty applied when purchasing gold jewellery which make it more expensive.
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Gold’s Record As Money#
But every single one of those gold based currencies eventually failed – the gold stopped circulating as the money of normal transactions, as currency. So its best to avoid the misunderstanding of history which leads so-called gold bugs to regard gold as the worlds only true and permanent money, because the hard historical fact is that it has been tested – often – and it both disappears and re-appears, depending on the prevailing economic circumstances.
Yet what is different about gold and other forms of money is the way they disappear, and why. Because its natural qualities recommend it as a high quality form of money gold suffers from Greshams Law, a common sense law in economics which states that bad money drives good money out of circulation.
Think about it for a moment and youll see that given a choice of spending good money or bad money youd spend the paper and keep the gold as a store of value. So in an economy where economic and political considerations have combined to produce a paper currency running in parallel with gold, and where that currency is showing the early signs of being dangerously expanded in supply, then people will elect to hold on to gold and spend paper. Magnified millions of times by everyday transactions in a typical economy this eventually stops gold circulating as money.
Every few years, and when circumstances are right, gold returns. It has a history of doing so which has lasted those 4,000 years.
Five Things You Need To Know Before Buying Gold
I offer insights into gold and silver investments, the precious metals industry as a whole and am the CEO of American Hartford Gold.
Theres been a lot of talk about gold in the news the past year. I have been asked a variety of questions about investing in it throughout my career in the precious metals industry. Here are five frequently asked questions and what you should know before buying gold:
1. Why purchase gold or silver?
In stable times, I believe that at least 10% of ones portfolio should be allocated to precious metals such as gold and silver for the purpose of diversification, and many experts, such as Ray Dalio, hold similar views.
The stock markets plunge in March 2020 hurt countless Americans. Retirement accounts that took decades to build followed the markets performance into double-digit losses.
Stock market volatility aside, the value of the dollar has been consistently diminishing. What does that mean for anyone holding cash reserves in their bank? A corresponding loss in purchasing power. Precious metals, which have increased in value the past several years, can offset that loss, with investors using the inverse relationship to protect their portfolios. Precious metals are a way to hedge against inflation and can even add stability to retirement accounts.
2. Is now a good time to buy gold?
What does all that mean?
A $100,000 investment in gold in 2000 has the purchasing power of about $535,000 today.
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Store Some Coins Near You
As I mentioned earlier, you should always have access to some gold. You can put it in a safe at home or bury it outside whatever you want just make sure you can find it. The key is to have direct access to your gold if something happens.
However, you shouldnt store all of your gold nearby just what you want to have available in a crisis situation. You should have your insurance outside the country. The United States, for example, confiscated gold back in 1933 under Franklin Roosevelt. The same happened under Mussolini in Italy, under Hitler in Germany, and under Stalin in the Soviet Union.
Switzerland, on the other hand, was the last currency to go off the gold standard. They have always had a currency even during wartime that could be exchanged for physical gold. And the politicians dont have the power to confiscate gold there.
So, as a general rule, if you have over $50,000 to invest in gold, store it in a safe jurisdiction. For anything less than that, keep it nearby.
Gold Bullion And Physical Gold
A popular investment product for investors of all types is gold bullion. Gold bullion is the physical metal itself in a refined format suitable for trading and can appear as gold bars, ingots or coins. Investors can usually purchase these from a precious metals dealer, bank or brokerage on the internet or in person.
Additional to gold bullion, investors can choose to purchase gold jewellery or any other physical gold products. However, there is often a price mark-up on gold jewellery due to the labour involved and retail pricing of the product.
Physical gold cannot be stored as easily as other financial assets. It takes up lots of space and comes with the additional risk of loss or theft. When buying and storing physical gold of any sort, you should ensure that you have insurance that covers it in the case of loss or theft. View our gold price chartâ for more information on trading physical gold.
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How Is That Gold Used#
Gold is not consumed in any meaningful sense. A tiny amount finds some use as false teeth because of its inertness, and some is used in electronics because of its non-corrosive nature and excellent conductivity.
But currently well over 95% of the world’s gold is held as a wealth store – either in bullion vaults or as jewelry, which is generally considered a private monetary reserve .
This stock of gold isn’t disappearing, and its supply is growing at a very slow rate compared to its overall stock. This feature of a nearly fixed above ground quantity, growing slowly, has been true for about 4,000 years.
So you can now see that there exists a large, but not too large, and almost fixed quantity of gold in the world, almost all of which is held by its owners as a tangible store of wealth. That is something which is true of nothing else.
In such circumstances gold’s reliable rarity is again noticed by savers. Its great use is as a money proxy when artificial forms of money are not being properly restricted in supply. In such times gold’s unexpandable supply causes it to be a much more reliable store of purchasing power than currency. Nothing does this job so reliably and so well as gold, because nothing matches the unimpeachable rarity and stability of gold’s above ground supply.
Better still, as people come to remember and appreciate this unique quality their demand for gold causes not just a retention of purchasing power, but a multiplication of it.
What It Means To You
Between 1979 and 2004, gold prices rarely rose above $500 per ounce. The rise to record highs in 2011 was a result of the worst recession since the Great Depression, and the 2020 records were due to the COVID-19 pandemic.
Most financial planners advise that gold comprise 10% or less of a well-diversified portfolio. If you’re holding more than that, talk to your financial advisor before gold falls again.
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Is Silver Always A Good Investment
Silver has not historically performed as well as gold during recessions and stock market crashes. As mentioned above, this is due to its high industrial useif economies weaken. demand for this portion of silver normally declines.
But as this article has shown, there are numerous factors working in silvers favor for the foreseeable future. And like gold, silver is a monetary metal and thus will respond to monetary dilution and fiscal unrestraint. Until the current system is retooled to discourage rampant currency creation and politicians are more financially responsible, history says silver will remain a strong asset to own.
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A History Of Holding Its Value
Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. Since ancient times, people have valued the unique properties of the precious metal. Gold doesn’t corrode and can be melted over a common flame, making it easy to work with and stamp as a coin. Moreover, gold has a unique and beautiful color, unlike other elements. The atoms in gold are heavier and the electrons move faster, creating absorption of some light a process which took Einstein’s theory of relativity to figure out.
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Where To Buy Gold In Dubai
If you want to shop for gold jewellery the gold souk in Dubai is a great place to start. Its got a row of gold shops which sell a variety of designs and styles. You can also head to any of the malls in Dubai. These feature some of the most popular jewellery brands in Dubai like Damas, Joyalukkas and more. Another great option is the Gold and Diamond Park Mall, where you can purchase precious stones, gems, silver, gold, platinum and high-end personal accessories.
With all these reasons to buy gold in Dubai the emirate truly lives up to its title of being the City of Gold. Have you ever purchased gold from Dubai? Let us know in the comments below. We hope you found this article informative and helpful. If you did do share it with your friends and family and stay tuned to MyBayut for more interesting articles on life in Dubai.
Silver Inventories Are Falling
Governments and other institutions used to hold large inventories of silver. But today, global stockpiles are at record lows. In fact, the only countries that warehouse silver are the US, India, and Mexico.
Look whats happened to those inventories since 1996.
The amount of silver held by governments worldwide is equal to only three weeks of mine supply!
A big reason governments dont hold a lot of silver is because coinage is no longer made from the precious metal. But if future industrial needs are difficult to meet, governments will be ill-equipped to support them.
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Only The Most Liquid Coins And Bars
You want to get as much gold for cash as possible. The main rule is to build up your liquid gold and silver stock. This means you should invest in legal tender coins such as the Maple Leaf, the Austrian Philharmonic, or the Australian Nugget. The main reason is that you dont want to run around with a kilo bar in a harsh crisis. Just make sure they are a legal tender and that they have a low fabrication fee.
For example, lets assume that you buy a maple leaf the coin from the Canadian mint. When you buy, the price of the physical ounce of gold should be as close as possible to the paper spot price of gold. That is always the underlying way you calculate the value of an ounce of gold.
Then, on top of that, you have to pay the fabrication fee and then you pay a brokerage fee for all the work the dealer has to do before you can get it delivered to you in person.
Whether you buy a gold coin like the Maple Leaf or the Austrian Philharmonic or the Australian Nugget , if you can buy them directly in a shop or an online store, make sure that you dont pay more than 5-6%. It really depends on the setup, but that is the general price range. As soon as you are happy with your stock of smaller domination coins, you can move up to bigger formats.