Hola!!!
Rahul!!! Rahul!!! Distant shouts from his mother from living room, made him come back to reality from his deep thoughts, while he was going through the special edition of Forbes, which was published last night. He responded back, Mom, what do you need? She mentioned of a need to get to a nearby big town to purchase some gold ornaments. When he exclaimed, why do you need them now, I don’t recall you mentioning any occasion for the next couple of years. Then she came near him and said that, it’s a part of saving for his sister’s wedding, which might take place after a few years from now. Then Rahul immediately asks her, why you don’t just save money and buy them after the marriage gets confirmed. To which she says, but the gold prices might go up and we would need more money to buy them, but then Rahul says, we could invest in gold instead, which would serve the purpose and has additional benefits. For which she exclaims, I don’t truly think so, this would work. And then, Rahul starts explaining to his mom on how to invest in gold and not to be concerned about the price surges and also get away from the danger of being robbed, as he brings back the level all the way from the blood line of the gold to till date as follows:
GOLD
Rahul: What is the gold?
Mom: Seriously, you think, I don’t know, what gold is!!!
Gold is a shiny, yellow metal which can be easily melted into bars, coins or jewelry. Gold is a chemical element with the symbol Au. It is the most widely accepted forms of physical currency in the world.
Rahul: What makes gold better than other metals to be used as an investment?
Mom: Maybe because it shines
Gold doesn’t rust, corrode or decay. It’s lustrous metallic qualities, its relative scarcity, and the difficulty of extraction is the cause of its value.
Rahul: Who is a gold bug?
Mom: Let me guess, somebody like you
Well, yes maybe. Gold bug is a term used in the financial sector to refer to someone who is extremely bullish on the commodity gold as an investment and or a standard of measuring wealth.
Rahul: What drives the price of gold?
Mom: For sure, it’s weddings, everyone buys a lot!!!
There are several factors which drive the price of gold such as:
• Central Bank Reserves
• Value of the U.S. Dollar
• Jewelry and personal attractions
• Industrial electronic demands
• Gold mining rate
• Wealth protection or Investment needs
Rahul: What are facts about gold?
Mom: I don’t know, you say
Some modern-day key facts include:
• The total estimate of gold, which is mined so far is around 200,000 tons. Which kept together would make a cube of 21meters on each side. (Jewelry: 92,947 tons, 47.0%, Private investment: 42,619 tons, 21.6%, Official Holdings: 33,919 tons, 17.2%, Other: 28,090 tons, 14.2%) *.
• Earthquakes can create gold.
• Astronaut helmets come equipped with a visor coated with a thin layer of gold to block harmful ultraviolet rays from the sun.
Rahul: What are the various ways to invest in gold?
Mom: Buying rings, bracelets, necklace like that
The common ways to invest in gold are:
• Gold exchange-traded funds (ETFs)
• Mining stocks
• Physical gold (e.g., gold coins, bullion, jewelry)
• Gold Futures Options
• Government Bonds
Rahul: What is the gold standard?
Mom: It should be something like kilograms, pounds, Hmm!!!
The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the best quality level, nations consented to change over paper cash into a fixed measure of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed cost is utilized to decide the estimation of the money. For instance, if the U.S. sets the cost of gold at $500 an ounce, the estimation of the dollar would be 1/500th of an ounce of gold.
The gold standard developed a nebulous definition over time but is generally used to describe any commodity-based monetary regime that does not rely on un-backed fiat money, or money that is only valuable because the government forces people to use it. Beyond that, however, there are major differences.
Some gold standards just depend on the real flow of physical gold coins and bars, or bullion, but others allow other commodity or paper currencies. Recent historical frameworks only granted the ability to convert the national currency into gold, thereby limiting the inflationary and deflationary ability of banks or governments.
Rahul: What are the benefits and risks of gold?
Mom: Yeah, I better know it all
One of the essential attractions of gold as a speculation choice is the security of realizing that the cost is going to rise consistently after some time. Obviously, verifiably, the cost plunges every now and then – yet it generally returns up.
Inflation often instills fear in the hearts of investor since it will quite often influence the estimation of the cash they have in the bank. Over the long haul, the buying intensity of the dollar typically decreases.
Any financial specialist would have a dread about how their speculation would turn out however it appears this dread turns out to be less with regards to gold investing.
The absolute first issue with putting investments into physical gold is the place you are going to store the valuable metal.
Investments should produce income. Gold doesn't generally meet this condition since it creates nothing when you own it.
Something else about physical gold is that you generally need to consider the premiums and tax duties issue. Regularly, you pay a top notch when you purchase the metal – it is constantly increased from the current market cost.
Tidbit Wrap
Understanding different manners by which one can put investments into gold other than physical gold and keeping it easy to decrease the danger of security assurance needs and taking advantage of the different structures wherein gold can bolster a speculation.
Opportunities are history of its value, inflation hedge, geopolitical uncertainty and increasing demand.
Obstacles are not being a passive income asset and premium taxes.
Who should invest here:
An investor who is happy to diversify his portfolio to hedge against economic recessions caused by the inflations and deflations of fiat currency, alongside confidence in the value of gold due to its long history as a form of currency in the events of geopolitical uncertainty. In any case, not expecting any easy passive revenue until the gold is sold for higher premium when demand rises.
As Rahul completes his clarification on explanations behind putting investments into gold and stops to tune in to what his mother needs to state, she basically reacts by ascending from her sitting position and says “I don’t know all these investment stuff, go and explain it to your father, if he allows you, then I’m also fine” Rahul laughs and says, I’m hungry now, let me have some food to get some energy to start explaining all this from the beginning again to dad.
Gold’s Performance:
Let’s discuss a sample of GOLDs performance from Mr.Vinstors# gold bugs portfolio:
Year 1940 to Year 1950 - $34 Per Ounce**
Year 1950 to Year 1960 - $35 Per Ounce**
Year 1960 to Year 1970 - $37 Per Ounce**
Year 1970 to Year 1980 - $590 Per Ounce**
Year 1980 to Year 1990 - $392 Per Ounce**
Year 1990 to Year 2000 - $275 Per Ounce**
Year 2000 to Year 2010 - $1400 Per Ounce**
Year 2010 to Year 2020 - $1800 Per Ounce**
#Vinstor – The Value Street Value Investor
*These are subjected to changes.
**Per Ounce - These are varying estimated values obtained from the historical data on the corresponding companies used as examples for conceptual understanding and do not represent any financial data or investment advice.
Disclaimer : All the conversations are solely for the understanding of the concepts and doesnot represent any live examples.
