Investing in gold: Is it the safest alternative?

Thousands of investors are inclined to start investing in gold, one of the most coveted precious metals, due to its stability and liquidity

Is it advisable investing in gold? Few things have been as coveted throughout history as gold. The passing of the centuries has not diminished its importance: it adorned the finest statues in Ancient Greece, triggered the search for Aztec treasures, and its deposits unleashed the gold rush in the 19th century.

Kings, conquerors, pirates, business people… Virtually everyone has been on the lookout for it. The evildoers threatened with "the bag or life." And to this day, it is still said that "time is money." These two comparisons elevate this commodity to a tremendously high level, presuming it to have a value comparable to that of time and life itself.

Gold is also one of the oldest investment products. It has been used as a method of payment since the earliest times, such as in the 7th century B.C., when what is considered the world's first coins, made of an alloy of gold and silver, were minted in the kingdom of Lydia, or during the time of Julius Caesar, when it was already common to use gold coins to trade goods and services.

And it is undeniable that it is still as valid today as it was two millennia ago. In fact, according to data provided by the World Gold Council, in 2022, the demand for this material experienced an annual growth of 18%, scoring the highest figure in more than a decade: 4,741 tons.

Sooner or later, it is common for all investors to consider investing in gold. But what is the reason for its success?

This metal is considered the safe-haven asset par excellence. It is a solid and safe investment, especially when your mind is set on the long term. And it provides valuable stability in a scenario as marked by instability as the current one.

But what strengths make it so attractive to savers, and what weaknesses can dissuade them from investing in gold?

The advantages of investing in gold

To begin with, gold is one of the most liquid products on the market. Unlike dividends or government bonds, it is universally accepted and valued, so it is possible to convert it into cash anywhere on the planet, regardless of where it was acquired. When it comes to gold, there are no languages or borders.

Nor does it depreciate as sharply as other commodities, especially when looking at its historical evolution. Its value is sustained over time, being much more stable than other assets, which tend to be more volatile and often depend directly on current events. A corporate scandal or a change in legislation can sink a company on the stock market, but it is more difficult for them to bring down the price of gold.

Many of the tons of gold mined are used to produce jewelry, a sector with a very high demand that stabilizes its price. New pieces and items of jewelry made from this material are constantly being created, so the market will always demand it, which is an authentic guarantee for investors who are hesitant about investing in gold.

On the other hand, its value usually increases when inflation arrives. Hence, it is a good defense mechanism for people who want to act against the generalized price rise.

And finally, the acquisition of gold is very useful for diversifying the investment portfolio of savers. Putting all your eggs in one basket can be a blunder, which is why many people want to implement an investment strategy based on diversification. Investing in gold can, therefore, be the ideal complement to the purchase of equities or debt securities, thus reducing the level of risk the investor faces.

But all that glitters is not gold.

The disadvantages of investing in gold

One of the main disadvantages of investing in gold is that, unlike other investment products, the saver does not enjoy passive income, as can happen with dividends associated with shares. In this case, the only benefits you will receive will be at the time of sale, depending on how much its value has increased compared to the time of purchase.

However, there may be a situation where gold is purchased when the price is very high due to a speculative bubble. And when the investor wishes to convert it into cash to recover his capital, the exchange price is significantly lower, resulting in losses.

On the other hand, if gold is purchased physically, storing and protecting it is essential. This metal not only takes up space but is also susceptible to damage or even theft. For this reason, the buyer must try to find a space to store it.

It should be remembered that, as with other investments, once the sale has taken place, it is necessary to pay taxes on the profits obtained, indicating it in the income tax return and paying the corresponding taxes. Up to 6,000 € it is compulsory to pay 19%, while from 6,000 € to 50,000 € the rate rises to 21%, and from 50,000 € onwards 23% is applied.

However, in the European Union, a unique tax regime exempts those involved in buying and selling operations related to gold investment from paying VAT.

What methods are there to invest in gold?

There is no single way to start investing in gold—quite the contrary. Savers have several mechanisms at their disposal, and they can choose from the one they find most convenient or the one that best suits their needs.

Unsurprisingly, one of the most popular ways to start investing in gold is to buy it outright through jewelry, coins, or ingots. This is the most conventional technique and forces buyers to store the amount they have purchased.

Other people, however, choose to start investing in gold indirectly, for example, by buying shares in a mining company engaged in extracting and selling gold. Since their business activity is based on this commodity, it is usual that the price of their shares increases as the price of gold increases, and vice versa. But it is crucial to keep in mind that many more factors come into play here, so it is a riskier option, and the company's viability should be thoroughly investigated before injecting capital into it.

Another of the most common options is to subscribe to an ETF (Exchange Traded Fund) specialized in gold. In other words, an investment fund dedicated to investing in gold, the price of which usually replicates the performance of this material. The securities are traded similarly to other funds, but it should be borne in mind that this alternative involves certain commissions and management fees.

Finally, other investors prefer to use futures contracts, an agreement between the buyer and seller to establish the future delivery date of a certain quantity of a commodity. The price is fixed in advance, so there is a component of uncertainty, but both parties commit in advance to facilitate negotiation and exchange.

Inversa, an alternative to obtain secure profits

As we have seen throughout this article, the stability and liquidity that characterize gold are two of the main reasons why it has been, is, and will be such an appreciated asset by investors. But another of its great attractions is, without any doubt, the good returns it has offered recently.

In the last year, its value rose by more than 10%. Looking back over the previous five years, this growth is as high as 59%. And in the last fifteen years, it has risen by more than 140 %.

In short, this metal can provide juicy profits for those who invest in gold as long as they acquire it at the right time. And, like all investment products, it can also cause significant losses.

But is there an equally stable and solid alternative to enjoy profits without exposing oneself to so much risk?

People looking for an investment mechanism with these characteristics will find Inversa Invoice Market a valuable ally. Based on the advance of invoices, this alternative financing platform offers very interesting returns to all users of its marketplace.

A formula based on crowdfactoring, which works in the short term and allows citizens to finance small businesses while enjoying an interest of up to 10% in periods that are sometimes less than a month or three months, always depending on the conditions of each operation.

Unlike investing in gold, the risks are much lower. After all, the price of this metal is variable, and it is always possible to fall. In Inversa, the saver knows in advance what his profit will be. In addition, many of the invoices are insured, and the solvency and past performance of all companies requesting financing are carefully examined.

An alternative with which it is possible to give local businesses the support they need while receiving a higher interest rate than many other mechanisms. All without compromising security.