Myths of Gold Investments

 The Hard Truth About Gold

With gold prices having hit all-time highs during 2024, the present moment illustrates some of the well-established merits of investing in gold.

There are many ways to invest in this precious metal, ranging from gold mining stocks and gold ETFs to securitised SDAX Gold Tokens.

Historically, gold has enjoyed a strong reputation as an intrinsically scarce, safe haven asset – a sturdy hedge against inflation and an excellent investment choice for diversifying a portfolio.

However, certain inaccurate perceptions about gold investments continue to have a hold on too many people. Below, our experts have set out a few examples of what we mean by this.

“Holding cash is better than holding gold”

While gold has its own millennia-old heritage as a currency – stretching back to around 700 BC – today’s world is dominated by fiat-based currencies that lack gold’s intrinsic value. Instead, such currencies operate solely on the basis of the faith and confidence that people have in their worth.

This is in stark contrast with the longstanding track record gold has as a reliable store of value. Even during times of geopolitical uncertainty and currency instability, gold has proved its value as an asset.

There are good reasons, after all, why central banks continue to hold significant reserves of gold: they recognise that gold helps to preserve purchasing power and protect their wealth from depreciation.

Gold: worth its weight, and resilient in volatile times

We might now be in an age of widespread digital transactions, but if anything, gold’s supposed “relic” status underscores its value and importance in the “here and now”.

Paper currency, after all, can fluctuate greatly in its value due to interest rate changes and monetary policy implemented by central banks. Cryptocurrency, too, has become associated with volatility.

Gold, however, has maintained a consistently stable value even amid the drastic changes and pressures affecting other asset classes. It is an investment that has stood the test of time, providing safety and reliability through a variety of circumstances.

“The value of gold only ever goes up”

As highly as gold is regarded as an investment, it is also important to adopt a realistic and transparent perspective.

There is no investment that “only ever goes up”, and we can also apply this observation to gold. Although historically stable, gold prices are not static, being governed by the same law of supply and demand that applies to all investments. Macroeconomic factors, such as monetary/ fiscal policy and inflation, will also inevitably exert their influence on gold.

Nonetheless, gold does have a very well-deserved reputation and track record as a safe haven asset. Gold’s enduring value, demonstrated time and time again across many generations, makes it a compelling investment during an unpredictable market.

At SDAX, we are strong believers of the positive role that gold investments can play in a broad range of portfolios. This applies particuarly so during the current market conditions we see today, when this precious metal’s advantages are arguably as evident and important as they have ever been. Please feel free to contact us to learn more about gold and other alternative investments.