A lot has been happening in the gold industry as of lately. 🎉
With the Coronavirus pandemic and current recession still sweeping the world, more and more investors have been turning to gold to safeguard their wealth and continue saving for the future. In today’s article, we asked a few gold experts to give us their thoughts on gold and the current state of the economy.
We’ve written about this a lot on the Minted blog, but here’s a little recap as to why gold is a great investment.
It hold inherent value
Gold has been around for centuries and plays a large part in many modern cultures. What makes gold different to other assets is that it’s a physical asset that you can hold in your hand. People have tried to hack it, create it out of thin air and burn it – but gold remains as valuable as it was centuries ago. Not only is it a safe haven, but it is also a useful metal, that is used in electronics, dentistry and jewellery. The fact that central banks have only been increasing their reserves in the precious metals over the past few years is a sign that everyone should be too.
It diversifies your savings
Diversifying means putting your money into several different locations (no, that doesn’t mean under your mattress and behind the painting!). It simply means investing in several assets at once; this is so that when some investments lose value, others increase. It means you’re less likely to take a financial hit when there is a recession or an unexpected event such as a pandemic.
Gold is a great way to diversify your savings since it’s an asset that usually increases in value when the stock market decreases. By investing in gold, you are lowering your overall risk and protecting your savings.
It beats inflation
Every year, your money loses value to inflation. With interest rates at an all time low, your money is losing 2% of its value, causing quite a loss over time. Ideally, you want your savings to be making more than 2% every year so you can buy the same amount of goods in a few years time.
Gold increases in value over time, beating the inflation rate of 2%. This does vary from year to year, but since 2010 gold has increased by 36.6%! Recently, in August 2020, gold reached record levels of $2,000 per troy ounce! Over time, gold does beat inflation.
What the experts say
We thought it would be a good idea to reach out to some experts and see what they had to say on investing in gold. We asked every one of them the following question:
What is the number one reason you believe people should invest in gold today?
Here are the replies we received:
“Due to the financial situation of the Western world, real interest rates will remain negative for years” – Jordan Roy-Byrne, The Daily Gold
“Gold is driven by falling or negative real interest rates which result from low nominal rates or rising inflation. Due to the financial situation of the western world (huge amounts of debt and the need for low rates to service that debt), real interest rates will remain negative for years. That and the start of a new inflation cycle will underpin a very strong Gold market over the years ahead.”
“Gold becomes a valuable store of value at a time of massive uncertainty and political instability/chaos.” – Paul Von Zielbauer, Gold Investor
“Gold is a store of value and has been so for thousands of years. (One hundred years ago, an ounce of gold bought you a nice suit, a nice hotel room and nice meal…and it still does today).
If you believe all is well in the world, and the US dollar is in great shape with the Fed spending trillions to buoey financial markets, then gold may not be for you. But if you believe the dollar will lose value in the months and years to come, thanks to the historically high level of US debt and/or because the guy in the White House would rather burn the place down before admitting he lost re-election, then gold becomes a valuable store of value at a time of massive uncertainty and political instability/chaos.”
“In our view, both gold bullion and gold stocks provide excellent long term protection.” – Alan Newman, Editor of Crosscurrents
“The best estimates of all the gold that has ever been mined is roughly 440 million lbs. (220,000 tons). Since gold is virtually indestructible, all that has ever been mined is still above ground and is never going to disappear. On the other hand, currencies, stocks and bonds can all suffer through bear markets or even collapse. We believe the current environment harbors an incredible amount of risk for all paper assets. In our view, both gold bullion and gold stocks provide excellent long term protection, especially from inflation, which we believe will be much higher for years to come.”
Alan M. Newman, Editor
“Macro and geopolitical conditions have set the table for a once-in-a-lifetime gold (and silver) bull market.”
J Taylor’s Gold, Energy & Tech Stocks
Website: Mining Stocks
“Unlike other financial assets, gold has no “counterparty”” – Eric Coffin, Editor of HRA Advisories
“Public/private debt has reached levels where most economies can’t handle even moderate interest rates. The carrying cost is simply too high. We need a reset, be it debt write off, manufactured inflation to punish creditors and reduce the value of the debt, or competitive devaluation to generate export earnings to help economies carry those debts. No one knows what the endgame will be.
The fact we don’t know has driven gold buying. Unlike other financial assets, gold has no “counterparty”. It’s one of the most likely survivors as a value store, regardless of what path out of this mess we choose. And with negative real interest rates likely here to stay for a long time, the “no yield” argument against gold by the financial community disappears. Gold, and other commodities, perform best in a “negative real interest rate environment”. The long term correlation is quite strong. Central banks are saying they will not only tolerate a negative real rate regime, they will encourage it. That’s as strong a backdrop for gold as you’re likely to see and it could be in place for quite a while.
And, for the record, I’m not a “gold bug” in the traditional sense. Not waiting for the apocalypse. No bunker in the backyard. Even so, I’m surprising myself with the levels I think gold will reach in the next year or two, but I don’t see another path for it.”
“This is the best gold setup in years and it’s just getting started.” – Gwen Preston, Resource Maven
“There is no one reason. Instead there is a list of reasons that all point to gold: zero interest rates, rising inflation, and the Fed suppressing bond yields are all creating strongly negative real interest rates, which are the most important pro-gold force and will be in place for years. Add in a lack of safe havens (bonds don’t pay) and the need to hedge stock market exposure (because that house of cards could tumble) and gold truly shines. This is the best gold setup in years and it’s just getting started.”
What the experts say about gold and Covid-19
According to the website Investing News, here are these same experts have to say about gold and the Covid-19 crisis:
“Today’s economic crisis will get worse”
“Just because (those measures are) there, I don’t think we’re anywhere near out of the woods yet. Right now we have this excitement over infinite quantitative easing and that has markets rising, but I do not think it’s possible for markets to keep rising through the flood of terrible data that’s coming,”
Gwen Preston, Resource Maven
Website: Resource Maven
“It’s a perfect storm for gold”
“This scenario going forward is the best possible scenario you could possibly come up with for the gold price and the gold market. If you were going to try to design from the ground up the best market conditions that you could possibly have for the gold market, this is pretty much what you’d end up with.”
“Buffett’s conversion to gold is a signal for other stock market investors.” – MarketWatch
Warren Buffet, the leader of the anti-gold movement has recently shifted his stance against gold and recently bought 21 million shares in the gold miner Barrick Gold, spending a total of $563 million. Although gold stocks are not the same as buying gold bars, the shift in tactics does signal something is up.
Is now the right time to buy gold?
Most gold experts will argue that there’s never a “wrong” time to buy gold; timing the market and trying to buy gold at a low price is rarely a winning strategy (unless you’re an expert day trader).
Having said that, from the expert quotes we’ve gathered and the recent events in the world, we believe that holding gold in your portfolio is more important now than ever.
Want to get started with gold investing? With Minted, you can start with just £30 per month: no commitment, no fees and no contracts!