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19 Mar 2024

Investing in gold: How to make the leap

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Gold has captivated investors for centuries — and rightfully so. As a rare and precious metal with an enduring legacy of preserving its value, gold has never lost its lustre.

In today’s world of rampant inflation and economic unpredictability, the allure of gold has only grown. Investors are increasingly gravitating towards assets like gold to shield their wealth from financial volatility.

But amid a multitude of investment options, from traditional stocks to emerging markets, you might wonder if gold is still the best option for safeguarding your financial future.

Skrill, a leading payment service, makes it easy to transfer money to and from brokers when trading gold. If you’re wondering whether to invest in gold, keep reading to learn about the pros and cons.

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This article is not intended to be financial, investment or trading advice. This article is for information and solely for education purposes. It does not protect against any financial loss, risk or fraud.

The potential benefits of investing in gold

There are several reasons why investing in gold can be profitable. Here are five of them:

1. Inflation is rising globally: Gold is often used as a hedge against inflation. When the prices of goods and services rise, gold tends to appreciate in value. This is because gold is seen as a haven asset and investors turn to it when they are worried about the value of their money.

The Consumer Price Index (CPI) in the United States hit a 40-year high of 9.1% in June 2022. In Europe, the inflation rate for 2023–2024 remains above central banks’ targets and tighter monetary policy is expected to continue.

2. Geopolitical uncertainty: Gold tends to rise in price during times of geopolitical uncertainty. For example, the price of gold rose sharply in the wake of the 9/11 attacks and the 2008 financial crisis.

Currently, the ongoing rivalry between the United States and China, the war in Ukraine, and instability in the Middle East are all contributing to a rise in geopolitical uncertainty.

central bank buildings

3. Demand from central banks: Central banks around the world are increasing their gold reserves, which could also support gold prices.

According to the World Gold Council, central banks bought a record 228.4 tonnes of gold in the first quarter of 2023, representing a 176% increase from the same period in the previous year.

4. Diversification: Adding gold to a portfolio can help to reduce risk. This is because gold tends to move in the opposite direction of stocks and bonds.

So, if stocks and bonds are falling in value, gold may be rising. This can help to protect a portfolio from losses.

5. Intrinsic value: Gold is a physical asset, while other assets such as stocks and bonds exist on paper only. This means that gold has intrinsic value – while the value of other assets is based on speculation and is potentially more volatile.

The potential downsides of investing in gold

Conversely, there are reasons why investing in gold might be less attractive for some investors in the short and mid-term:

  • Gold lacks income generation: Gold is an unproductive asset, i.e., it does not generate any cash flow or dividends for investors. The primary way to profit is by selling it at a price higher than the purchase cost, which often requires long-term holding.
  • Rising interest rates: This could make gold less attractive to investors because gold is a non-yielding asset – i.e., it does not pay interest.

    This means that when central banks’ interest rates rise, investors have a better option to invest in assets that do pay interest, such as bonds. As a result, demand for gold tends to fall when interest rates rise.
  • Currency implications: A stronger U.S. dollar can depress the price of gold, which is mainly dollar-denominated.

    However, for investors using other currencies, a stronger dollar means they’ll need more of their currency to buy the same amount of gold.

    In essence, while the dollar price of gold may decrease, the effective cost for international buyers could actually go up due to unfavourable exchange rates.
US dollars
  • Possibly lower ROI: While gold is often referred to as a safe haven, it may not satisfy the appetite of those willing to take higher risks for potentially greater returns. Such investors might look to equities or other high-risk, high-reward assets as alternatives to gold investing.

How to buy gold online

If you decide to invest by buying gold online, here are some steps to take:

1. Do your research: Before you buy gold online, it’s important to do your own research and understand the different types of gold available, as well as the different ways to buy it. You should also compare prices from different dealers to get the best deal.

2. Choose a reputable dealer: Once you’ve done your research, you need to choose a reputable dealer. There are several online gold dealers, so it’s important to choose one that has a good reputation and that you feel comfortable with.

3. Choose the type of gold you want to buy: There are many different types of gold available, including physical gold, gold ETFs, and gold mining stocks. You need to decide what type of gold is right for you and your investment goals. Here are some things to consider:

a woman looking at her laptop as though researching gold
  • If you want to own physical gold, you need to store it in a safe place. You can store it in your home, in a safety deposit box, or with a gold storage company – depending on how quickly you might want to access it.
  • Gold ETFs are an option if you want to invest in gold but don’t want to own physical gold. Gold ETFs are traded on stock exchanges, so you can buy and sell them just like stocks.
  • Gold mining stocks are an option if you want to invest in the gold mining industry. As with Gold ETFs, gold mining stocks are traded on stock exchanges.

Choose a fast and convenient payment method like Skrill

If you’re looking to invest in gold, managing your finances effectively is critical. This is where Skrill stands out as a go-to payment method. Here’s why:

  • Speed: Skrill ensures fast transactions, allowing you to buy gold or withdraw your profits promptly. With just a few taps, you can transfer funds to your gold broker using your Skrill account.
  • Financial clarity: Another advantage of using a Skrill account for your gold investments is the ease of tracking your profits and losses. By keeping your investment funds separate from your main bank balance, you’ll have a clearer view of the balance of your trading funds.
  • Widespread acceptance: Skrill is widely offered by trading brokers, making it a reliable option for financial transactions in the gold market.

Keep in mind that in the complex world of trading, having a smooth financial transaction process can be crucial. Skrill helps ensure that this aspect of your investment strategy remains hassle-free.

Open a Skrill account

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Gold is an investment to consider for both new and old investors. In the face of rising global inflation and geopolitical uncertainties, gold is widely seen as a haven asset.

Yet, it’s essential to be mindful of its limitations, such as the lack of income generation and sensitivity to rising interest rates or a stronger U.S. dollar. For those willing to diversify their portfolio, buying gold can be a strategic choice to hedge against volatility.

Using a payment method like Skrill can simplify the process of buying gold online by offering a convenient and fast way to move money to brokers.

Ultimately, remember that the decision to invest in gold should be a calculated one, supported by careful research and a clear understanding of your financial goals.

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