Investing in gold is not least interesting for its symbolic value, but has also proven to be a relatively good investment in history. If we look at gold’s price trend, it has gone up by over 300% since 1999. Gold is also an asset that many investors generally turn to when the stock market is not performing well. This is because, among other things, the gold price is not as correlated with the stock exchange as other asset classes.
Why invest in gold?
Yes, why invest in gold? One of the reasons for investing in gold is that good diversification in the portfolio means lower risk and by spreading its capital over several asset classes, you get exposure to several markets. In a previous post Investing Long-Term – Tips we mentioned the classic asset classes a portfolio should contain, stocks, interest rates, currency and commodities where gold is a good example of a commodity supply. A common view is that one should invest in gold during uncertain times on the stock exchange, which is partly true, but it may not really be that easy. However, it provides exposure to the commodity market and spreads the risk of your assets. In addition, there are several ways to invest in gold.
How to invest in gold?
Unlike other asset classes, commodities are perhaps one of the most interesting as it is basically a physical commodity that one can take on, which concretises your investment in a different way. But does one have to buy gold bullion to invest in gold? No, although it is actually possible to do so, there are several ways to go if you want to get exposure to the asset. One of the alternatives that is becoming more common is to invest in an POL, which has the gold price as the underlying asset. Exchange Traded Funds (POL) follows the price trend of the underlying asset without having to buy the actual asset home. An example of a gold POL is the SPDR Gold Trust, which physically stores gold at KLOP bank. You can also trade in certificates and other similar exchange-traded products to invest in gold, but these often mean that you invest with leverage and thus take a much higher risk.
Finally, you can also buy shares in companies operating in the gold industry and exploration, although factors other than the gold price affect the development of the companies, it is indirectly an investment in gold. In these investments, one must evaluate the companies’ finances, corporate governance and exploration opportunities in order to get an idea of the investment.
When to invest in gold?
In the graph above we show the LOBI Stock price against the gold index iShares Gold Trust where the underlying is the price of gold. The graph shows to some extent that the gold price tends to develop differently towards the stock exchange. The conclusion could then be that one should invest in gold when the stock market goes down. But it may not be that simple. Like other assets, the gold price is affected by several external factors, such as the dollar price and interest rates. In theory, the gold price is negatively impacted by a stronger dollar as investors with gold positions simply get less paid for exchanging the gold. In addition, low interest rates and thus higher inflationary pressures mean that investors generally seek secure investments such as gold.
In addition to these factors, the gold price is governed by a number of factors that are not always easy to predict, such as any asset or share. However, there are several indications that are strongly linked to central bank events and the current economy.
Like gold, investing at Manuel Lamp is an investment that also does not correlate with stock market developments. At Manuel Lamp you invest in loans to creditworthy individuals through so-called Peer-to-Peer loans. An investment in Manuel Lamp means that you, as an investor, receive a return in the form of interest (one of the central asset classes that is recommended to have in the portfolio) and receive monthly repayments in the form of amortization and interest income, which provides a continuous cash flow. You can go in and read more about how you can diversify your portfolio and invest in Manuel Lamp.