Gold as an investment in times of crisis

Gold as an investment in times of crisis

· Ø Reading Time: 3 min

Gold is one of the most valuable precious metals on earth and has always had a magical attraction. It is not only used in jewelry and semiconductor production, but is also very popular as an investment. Especially in times of crisis, such as the Corona pandemic or the Ukraine crisis, investors benefit from positive developments in the gold price. And are protected from rising inflation rates, among other things.

For German investors, who in any case have not been able to earn any significant interest on their savings for several years and may even have to pay a custodian fee, the current inflation of more than 5% is resulting in major disadvantages. On the one hand, existing financial assets are losing massive purchasing power and, on the other, the cost of living is becoming much more expensive. A quick end to high inflation is not foreseeable at the moment (March 2022). This is the reason for many investors to turn their attention to investments gold bars and coins. The precious metal, unlike paper money, cannot be multiplied at will, has proven to be the ultimate crisis currency in all hyperinflations, and has been accepted as a medium of exchange in almost all cultures for several thousand years.

Gold has been a form of financial protection in crises for generations. Moreover, the precious metal has survived every crisis to date and often even emerged from them significantly stronger. Those wishing to invest in physical gold are best advised to contact established commercial precious metal dealers such as Reisebank, Pro Aurum or Degussa.

The current limit for anonymous gold purchases is EUR 1,999. From an amount of 2,000 EUR, traders are required by the Money Laundering Act to document the identity of the buyer. When purchasing gold through an internet retailer, the buyer’s personal information must be submitted during the ordering process, just like any other internet purchase. Furthermore, gold on the Internet must be paid in advance in most cases.

It is definitely worthwhile to compare different dealers and get several quotes before investing. It is important to compare the price of coins and bars with identical weight, fine gold content and minting. Since the price of gold fluctuates greatly, it is also advisable for investors to pay attention to the time at which the price was quoted, as the timing can be a possible reason for price differences among different dealers.

The fluctuations in the price of gold show that the precious metal is at best invested for the long term, over a period of three years or longer. In the event of a crisis, the investor is thus protected with a solid reserve. Moreover, when capital is diversified, gold investment is an important pillar for hedging a portfolio. In order to compensate for price fluctuations, it is advisable to acquire smaller quantities of gold over a longer period of time, which additionally hedge the investor in times of crisis.

Does gold protect against inflation?

According to the Federal Statistical Office, the inflation rate in Germany reached +10% in September 2022 (compared to the same month of the previous year). In August 2022, it was +7.9%. Money is becoming less valuable and how does it compare with the price trend for gold? In the long term, gold as a financial investment offers protection against inflation.

Let’s look at the gold price trend over the last two years alone. In March 2021, the price of a troy ounce of gold was around 1,450 euros. In mid-April 2022 it climbed to almost 1,800 euros, and in March 2022 it reached a new all-time high in euros: The gold price almost cracked the 1,900 euro per troy ounce mark. The increase in value over the period from March 2021 to April 2022 alone is therefore around 20 percent. This means that the gold price trend in euros has clearly offset inflation in Germany. And even the view in U.S. dollars is encouragingly positive: from 1,750 U.S. dollars, it went up to about 1,950 U.S. dollars in the comparison period. This represents an increase of around 13 percent.

In order to store the gold safely over a longer period of time, Trisor GmbH offers the solution in the form of fully automated and state-of-the-art locker systems. Accessible within a secure customer booth, the lockers are accessible at all times (24/7) without advance notice, offer the highest level of security, and are provided by robotics in an output tray. The process from registration to opening your personal safe deposit box is quick and straightforward. Already after the online registration and an on-site proof of identity, you can use your safe deposit box independently.