Global Inflation is sky high and the world's richest man just offered sound advice. Elon Musk recently tweeted in favor of investing in physical assets such as company stock as opposed to the dollar. The reason? Commodities are always appreciated as inflation soars.
But when you’re speaking of physical assets, no other commodity can come near Gold. It shares the same characteristic as company stocks but unlike listed companies, Gold doesn’t go bankrupt if the going gets tough.
Even then, these are scary times given the political and economic instability plaguing the world. Due to such uncertainty, it's normal to be confused about where to invest your money.
So, is Gold a good investment in 2022? This article will examine Musk’s advice of investing in physical assets like Gold and whether it's a good investment in 2022. So, without further ado, let’s dive right in!
First off, the tech mogul is no stranger to investment opportunities. Cryptocurrency and hedge funds currently hold most of his assets, while Gold is a commodity he backs due to its scarcity. Infact, Tesla just last year created a viable environment for gold investment as a means to diversify their portfolio.
This arrangement seems to be a financial masterstroke by Elon. Tesla recently dumped 75% of its bitcoin holdings to maximize its cash position. If his tweet is any sign, then those funds will go into buying tangible commodities like, you guessed it, gold bullion!
Let’s study the behavior of Gold prices in the last decade. Taking April 1, 2011 as our starting point, gold was trading at $1,418 an ounce on that date. It’s important to note that this was the highest price point for Gold since the global financial crisis of 2008.
Gold saw another huge increase in the same year reaching $1900 an ounce. This increase was due to people’s concerns about the US government's stimulus and the national debt. This is what’s known as a bull market where prices increase for a sustained period of time for a particular commodity.
However, as investor concerns eased, overall investments in Gold dropped and the bull run ended. Prices began dropping and by 2013, had reached $1300 per ounce. Gold wouldn’t see a bull run till 2020 afterwards.
The Russo-Ukrainian war has played a definitive role in gold valuation. Moreover, the economic ripples caused by the war have raised investor anxiety levels globally. As a consequence, people have begun flocking to safety assets like gold to manage the situation. This business move took the global gold price to over $2,000 per ounce in the March of 2022!
However, Gold prices are once again on a steady decline as the dollar appreciates. This drop in value is Gold’s longest negative streak since July, and has risen due to US federal reserve's measures to stall Gold price increases.
However, Gold is once again staging a comeback, with the London morning trades recorded at $1,719 per ounce on July 26th, 2022. Currently, the price stands at $1,722 with hopes of a further increase against a weakening dollar.
Gold is considered to be the most popular commodity in history. Since the periods of early civilization, it's been seen as a status symbol thanks to its unique and attractive properties. The importance of this precious metal also transcends racial differences. It was a wealth indicator from the Incas to the ancient Egyptians, multiple Chinese dynasties and among others.
Gold became recognized as a tool for trade when Darius the Great minted the first gold coin called the "daric" in the 6th century BC. Being the ruler of the Persian Empire, he needed money to fund his army's expansion. This financial aid would make conquests a lot faster. As a result, many nations worldwide began using gold coins as a form of currency.
Inflation is an increase in the prices of goods and services. Its root cause is the unregulated printing of currency in an economy. This happens when the supply of money passes available goods and services. For better understanding, we’ll examine the American financial situation.
The money supply was approximately $831 million from 1918 to 2008. In September 2018, Lehman Brothers closed shop and filed for bankruptcy. The Federal Reserve Bank needed to fill the void and doubled the money supply to $1.6 trillion in 3 months.
The government took the same action five years later, and money supply surpassed $3.2 trillion. It puts more money into circulation while increasing the cost of goods and services. However, the incomes of the general public didn’t increase leading to a possible financial crisis. The government brought precious metals to fix the situation.
Gold preserves the purchasing power over long periods ensuring economic stability. A good example is seen in the aftermath of the 1929 stock market crash. The price of gold rose between the years of 1929 to 1934. President Roosevelt saw the economic potential and signed the Gold Reserve Act. This statute forced citizens to exchange gold bullion for paper money at $20.67 per ounce. Over time, the government bolstered the reserves and returned the price to $35 enabling economic growth.
Another instance is the value increase from $1,000 in 2009 to $1,873.73 in 2011. This was a direct result of debt issues involving America and the Eurozone. Few investors took a risk on the dollar's declining value and recorded significant returns after buying gold.
A more recent example is the 2020 recession. The price of Gold in July was $1,882.35. By August, the price hit an all-time high of $2,062.50, with predictions that it would go to $3,000 or $4,000 marks.
Making plans for investing in gold in 2022? you'll need information on the opportunities it presents. Gold use has diversified over the years into the following major areas;
Given gold's trading history, it comes as no surprise that it's used as a physical store of wealth. Moreover, given its rarity, it's bound to always increase in investment value as you can store it in the form of Gold coins or solid gold bars.
Currently, it isn't easy to estimate how much gold is available in the world, but the United States is considered to have the largest reserve. America is followed by Germany, with countries like China and Russia consistently increasing their stockpile.
Gold is an excellent conductor of electricity because it's resistant to heat and doesn't rust.
There has been increased demand for use in connectors and cables, with gold being a soft and flexible metal. The precious metal has also become popular in the creation of cell phones. In 2017, the electronics industry accounted for 34% of the gold used in the United States. This utilization level was replicated in 2018 with an expense of 1,400 tons of gold.
Adornments account for the largest use of gold on a global scale. India and China have dominated the consumer market since 2018, as they control half of all global production. The same year, India consumed 500 tons of jewelry while China accounted for 1,200 tons . Its use has transcended conventional luxury items to decorative items like badges and medals.
Considering the high-risk situation of space travel, gold is used for the thin metal coatings of shields and visors. Gold particles also reflect infrared radiation from the sun to reduce temperature. Finally, it's used as a lubricant to counter the high radiation levels of space.
The metal is non-toxic and non-reactive, making it a perfect option for prosthesis use. Also, small amounts of gold are injected into the body to treat muscle damage and cancer.
There are multiple investment channels for utilizing the financial potential of gold. For your benefit, we've made the perfect recommendation for you;
In this case, bullion is defined as gold, which is at least 99.5% to 99.9% pure. Central banks and the government commonly keep it as a reserve asset. Bullion is considered a legal tender used by institutional investors to hedge their portfolios against Inflation.
An estimated 20% of the mined gold as bullion by central banks. Financial institutions use it to settle debts and stimulate the economy, being a reserve asset. The central banks also lend gold to bullion banks at a 1% rate to raise money.
You can purchase bullion in either physical or paper form. Always remember to make your Gold purchases from a reputable dealer to avoid contaminated Gold. Reputable dealers also ensure the safekeeping of your Gold.
For instance, you can begin trading physical gold instantly via the ISA Bullion mobile app. We facilitate Gold trades no matter where you are while offering you guarantees like Insurance, vaulting and the luxury of two way pricing to sell your Gold instantly in case you need to withdraw funds immediately. Our platform is also highly encrypted to ensure all safety during transactions and immunity to risk.
Download the ISA Bullion App for iOS or android now.
This investment angle lets you buy shares in a company that mines or refines gold. The share prices are a reflection of metal's movement over time. That said, the growth and return of the stock will depend on the expected earnings of the company.
These work on the premise of a precious metals futures contract. This agreement is legally binding and contingent on the delivery of the gold at an agreed price in the future. Only the price can be altered with quantity, quality, time and delivery location already set in stone.
With Gold futures, trades happen in dollars and cents per ounce.
Gold ETFs grant you access to accurate price movements without purchasing the physical asset. Instead, they are structured as trusts where the ETF holds a specific number of gold bars for shares disbursed.
All assets have their drawbacks, including gold. For instance, physical gold commodities are likely to be stolen due to their high value and worth. However, if you keep your Gold stored with ISA Bullion, we can ensure Gold safety in reputable 3rd party vaults such as Brinks & Transguard.
We also insure your Gold to facilitate lowest possible risk investments. Since it's risky for individuals to store actual physical gold bullion, it’s best practice to keep it in a proper safe by a financial institution.
Another drawback of investing in Gold is that physical gold investments can't generate passive income. However with ISA Bullion, you can lock in monthly profits as high as 10-15%! (This ability is reserved for stocks and mutual funds) There's also the risk of purchasing an impure product from gold dealers with unproven business records - but not with ISA Bullion.
From a short-term perspective, bullion investments can also be financially tasking. This negative is because you have to pay above the actual gold price when making a purchase. The good news however is that you can overcome this by making your gold trades with ISA Bullion.
BMO capital markets and UBS Global Wealth Management predict that the gold price will achieve high price stability between $1,700 and $1,800. Trading Economics projects a steady increase, with the price projection landing at $1,963 per ounce.
According to Goldman Sachs, the gold price is expected to rise to $2,500 by the end of the year. This increase is concerning rising demand from private Asian customers and the ripples of the Russo-Ukrainian war. The London Bullion Market Association (LBMA) also shared this position with a predicted increase of 0.2% before the war started.
The world's richest man has made a fortune based on smart investments and corporate determination. So his call for investment in physical assets has clear validity to it. However, you should assess your financial situation to prepare for any negative market turns.
With the current inflation situation, prices of goods and services are bound to increase. Therefore, the price of gold will most likely increase judging by the historical data discussed above. Therefore, we believe it is the right time to invest in Gold especially as we foresee more instability to persist in the near to medium term future.
To make easy Gold investments, simply sign up to the ISA Bullion platform and start trading Gold & Silver instantly. Whereas before investors had to physically hold Gold in order to trade it, our app allows you to make digital trades in physical Gold and Silver bullion from anywhere directly from your mobile phone. Lock in profits from a safe asset like Gold that can never depreciate to '0' unlike other commodities like crypto and stocks which are very high risk.
It only takes 4 simple steps to make profitable trades possible! For more information, get in touch with our team now.