Should Amateurs Invest in Gold in 2020?

Should Amateurs Invest in Gold in 2020?

Introduction

Gold is one of, if not, the oldest means of purchase still being used today.

While most of the thousands of currencies that have been around are long gone, gold still holds it’s intrinsic value.

Gold is generally considered to be a safe haven, holding value when other investing opportunities do not.

In 2019, we have seen quite a long bull run for gold.

The main reason for the bull trend has been the tensions in the global economy, where tariffs between the U.S and the rest of the world, have been a big talking point.

The central banks have also been purchasing gold.

This blog post discusses if you should invest in gold in 2019 or if it’s too late.

Why is gold valuable?

There are some reasons why gold has been valuable throughout history.

Some of the reasons include:

  • Gold is not easily damaged. If you look at a gold coin that is hundreds of years old, it will still have a similar glow as it had when it was created.
  • Gold conducts electricity.
  • Gold is easy to work with.

How much gold is there?

Gold is a finite resource, but it is hard to calculate the intrinsic value of gold based on this. There is about 10x more value in paper gold compared to how much is stored in physical gold.

Uses of gold

Gold can be used as a store of wealth as well as a means of purchase using gold coins.

Gold is also used in industries and in retail goods such as jewelry.

The price of gold in 2019

As you can see, the gold price has had a steep run starting in May 2019.

Gold Index 2019
https://goldprice.org/spot-gold.html

Reasons for this can include:

  • Decreased economic stability in the world
  • Central banks buying gold

The VIX index

Below, we have the VIX index, many times referred to as the “fear index”. The VIX index measures volatility in the market.

The VIX index is often used to see how much risk the market is willing to take.

When there are tensions and uncertainty in the world, the price of <xxx>

When we look at the VIX index below, we can see that it spiked at the end of the graph, amid Donald Trump’s trade war with China.

Some people trade the VIX. Most recently, we saw many people crushing their trading accounts when the VIX spiked. <when was this?>

https://finance.yahoo.com

How to follow the price of gold

Here are some places where you can follow the price of gold:

How do you buy gold?

There are many ways in which you can buy gold. There are pros and cons for each type of holding. Which one you like is a personal preference.

Here are some examples of gold ownership:

  • Physical gold
  • Gold ETFs
  • Gold Futures
  • Gold mining stocks

Conclusion

Gold will most likely, in the foreseeable future, be a globally accepted storage of wealth.

One thing that I find interesting is what impact cryptocurrencies, especially Bitcoin, will have on gold.

InvestmentExamplesProsCons
JewelryRings, BraceletsEasy to purchase and sellDo not contain much gold
Gold ETFsEasy to buy and sellYou own a derivative
Gold FuturesComplicated
Gold Mining StocksEasy to buy and sellYou own a company, not just the underlying commodityYou own a company, not just the underlying commodity

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