• Slideshow Images
  • Slideshow Images
  • Slideshow Images

Gold as an investment

Baizat Team
Invest, Saving, Tips, Investment, Risks

When creating an investment portfolio, it is important to have a diverse range of high and low risk investments. A historically reliable investment over long term periods of time is gold.

There are many avenues available to buy, trade, and invest in gold. This article will provide a brief overview of one of the safest and more reliable investment methods of the past 100 years.

Remember: never borrow money to invest or invest without first seeking professional advice.

All advice given in this article is purely the opinion of our writers and is by no means an instruction on how to carry out your investments.

Basic Information about Gold

Most of the gold available in the market is in the form of 18, 22 and 24 carat, although in the western world 9 carat is widely available too (but not as valuable). The carat rating is a measure of purity; if the gold has a higher number, it will be of higher purity.

Historically in many nations, gold was used as money and the "gold standard” was created to give a direct financial value to gold. In the modern age, however, the use of gold has changed and is no longer used as a currency by any active countries.

In today’s world, gold is most commonly owned, or bought as gifts for loved ones, in the form of jewelry or precious items which have a sentimental value attached to them. Selling these beloved possessions may not be an option for the owner.

However, for investors, gold is as a commodity that holds great importance in an investment portfolio.

Gold and Investment

Gold is the most common precious metal used in investment. Investors generally buy gold as a "safe long term option” to protect against the worry of economic, political, or social crises (including investment market declines, issues with national debt, currency failures, inflation, war and social unrest).

It is very common for investment advisors to recommend that at least a small portion of an investment portfolio should be held in the form of gold. However gold should not be used as a short-term investment.


Buying Gold

Gold is obtained differently by investors than by those who buy it in the form of ornaments, watches, necklaces or rings. It may be physically purchased in bullion, held in the form of "guarantees” or obtained by trading in exchanges.

What types of gold can we buy when investing?

Gold Bullion: Physical gold in the form of bars, ingots or coins.

This is a better form of investment than jewelry or ornaments–the gold is mostly in pure form and there is no associated production charge. Gold bullions are available in most jewelry stores and many banks in the Middle-East. Additionally, gold-vending machines have been installed in various outlets throughout MENA, including in the UAE.

Gold Security: Purchasing Gold Securities is like buying shares in a company, but instead you are purchasing shares in gold. An effective and economical way of holding gold in non-physical form–a share of gold is measured in Troy Ounce or Grams.

An Investor can hold this share for a long time and accumulate gold at various prices in order to build up a gold portfolio. An example of its popularity includes Dubai; where banks will sell Sharia compliant Gold Securities.

Gold EFT (Exchange Traded Funds) and Gold Futures: Investing in gold futures trading is based on speculating on the rising and falling value of gold.

This is considered very risky, mainly done by traders, and is not an advisable method of investment for those who wish to invest for the future.


Why invest in Gold?

Below are some key factors about investing in Gold:

A Safe Haven for Wealth

Gold is considered one of the safest and most secure forms of storing wealth. Gold has been used as collateral for loans and can be sold to assist in uncertain times.

Low risk Investment

An investment in gold is relatively low-risk. Gold is always worth something, it has never been worth nothing. In times of great economic crises, gold has remained a valuable commodity to own whilst shares and other common investment tools have plummeted.

If you ever face a crisis, physical gold is a liquid asset you can cash in fairly quickly and effortlessly.

A Low but Consistent Return

As with all lower risk investments; the potential amount of return is low compared to other high risk forms of assets such as equity and shares.

However, that low return is one of the most consistent. Gold in recent years has given very reliable returns–it has outperformed most other forms of investment. In a short period of time (around 6-7 years from 2006 to 2012) gold has yielded an average return of around 31% per annum.

Gold as an Investment versus Keeping your Money in a Safe

Gold is a better defender for any economic circumstances—it provides security for you and your family, whereas currency notes are government issued paper denominated for goods and services.

Due to inflation, currency loses value over a period of time if kept in your safe, but gold has remained ever present for over a hundred years as real money.

Gold is considered to be one of the more safe forms of investment for people in any situation because it is physically real and easy to liquidate.

Gold and its Assured Value

Like any other investment gold too, carries a risk. It can lose value and you may end up with less value than was invested. As with any investment, it should not be used for short term gains and should not take up a large amount of an investment portfolio.

A Good Starting Place for Beginners

As the chance of making a big loss with gold is historically low over a long period of time, and gold has survived many financial crises,it remains is a popular investment choice for investors. Many will keep around 10% of their investment portfolio in gold.

For example, a housewife who is not aware of the share market and other investment avenues; can buy a small quantity of gold over a period of time. Since gold has easy liquidity, she can keep to assist in an investment for her child's education, marriage or for difficult times.


Find out more about investment

To learn more about investment, read the Baizat article 7 top tips for Investment Success, keep an eye out for Baizat Seminars, or if you would like a personalized service; fill in a Consultation Request Form.

Featured Article

In the UAE and GCC region some of the biggest selling mobile phone brands include Samsung, Apple, Blackberry and ...

Top 5 Articles