However, investing in gold and other precious metals, and particularly in physical precious metals, involves risks, including the risk of loss. While gold is often considered a safe investment, gold and other metals are not immune to price drops. Is gold a risky asset or a safe haven? This question seems to be a favorite of those who like to debate the value of shiny metal. The problem with the question is that it doesn't offer the right option.
Gold is not a risky asset or a safe haven. Gold is a store of value. It has been a store of value throughout recorded history and, if recent purchases by central banks are any indication, many countries around the world still see it that way today. However, economic crises are not the only factors affecting gold prices.
A major gold discovery could bring down the price of gold with a stream of new supplies; the wedding season in India, where gold is a popular wedding gift, may underpin it. Take the time to consider your options, and if you want to invest in gold, you can find out how that fits with your overall investment strategy. In addition, people like to point to the bear market that dollar gold suffered during the 1980s and 1990s as proof that gold is not a hedge against inflation nor is it worth owning for long periods of time. Some gold ETFs invest in stocks of gold mining companies, adding an additional layer of risk to investment.
In the end, the debate about whether gold is a risky asset or a safe haven is useless for the investor who buys metal as a store of value. This type of gold purchase would generally not generate dividends, but the benefits could come from an appreciation in value. A more important debate could be how the buyer of a store of value should distribute their funds between gold and other stores of value, such as silver, platinum and perhaps even copper. Other investors may want to diversify their portfolios by buying a gold ETF, for example, that is backed by physical gold, but that doesn't require investors to store gold ingots themselves.
The dollar is strengthening against other fiat currencies, but gold, quoted in dollars, continues to rise, so gold could send us a different message than what many people usually think. For example, some investors may be inclined to stay in the stock market but want to be exposed to gold and could therefore invest in stocks of precious metal mining companies. One of the reasons why the debate over whether gold is a risky asset or a safe haven seems to continue is the fact that a troy ounce of gold has a monetary value quoted in fiat currency. One of the problems with taking physical possession of gold is that thieves can also take physical possession of your gold.
For those investors who do not see gold in its historical context as a store of value, they may be interested in owning ETFs, such as the GLD or the IAU. When holding gold as a store of value in a world dominated by fiat currency, the only thing that should matter to the owner is the number of ounces he owns. Another aspect of the gold debate, which is often debated among those who buy gold or gold-related financial products, is the method in which gold should be owned. If you're wondering if now is the right time to buy gold or if you're considering investing in the future, do some research through a precious metals company.