World gold prices are steadily rising and this spring broke their historical maximum. Against the backdrop of the Russian invasion, Ukrainians are trying to save money and see this asset as a safe investment in the future, and often as a subject for earning money. Due to the fact that there is a limited amount of gold in the world, it is not subject to depreciation, and is definitely the least risky way to invest money. What are the specifics of gold as an asset for investment, what are the nuances, pros and cons of investing in precious metals, let’s try to understand in this article.

Investing in gold: pros and cons

In April 2023, the yellow metal reminded of itself with a rapid rise in price on the global market to $2000 per troy ounce (31.10 g), and this global event raised the question for investors, does it make sense to invest in precious metals, at a time when the price of the asset is likely to be at its peak? Will there be a continuation of such rapid growth?

According to bankers, the sharp rise in the price of gold is due to a combination of factors, which can be defined as follows:

• Uncertainty in the economy due to the changing direction of money flow around the world. It predisposes the perception of investing in precious metals as a way of diversifying the portfolio to reduce risks. The banking crisis in the United States, which affected major players in the banking systеm of the United States and Switzerland and changed the whole scheme of money circulation in the world, reduced investors’ confidence in their financial future.
• Political uncertainty caused by Russia’s aggression in Ukraine, which reduces the predictability of all political processes in the world.

If the pressure of these factors persists, the price of gold cannot stop its growth. Analysts predict a weighted average annual appreciation within 10%. In any case, it is difficult to consider gold as a highly liquid asset for retail investors who need to take out “short” profits. It is more of a defense mechanism that ensures the stability of all assets in a portfolio.

What to consider before investing in metals

Before you start planning your earnings on investing in gold, you should take into account the bank margin on buy/sell transactions, which averages 5-10%. That is, almost the entire expected annual income from investing money in precious metals can be eaten simply due to this difference. This is another argument in favor of the longest possible investment. According to analysts, this type of investment does not make sense for investments for a period of less than 5 years, especially considering that today cryptocurrencies and modern technologies in DeFi are confidently pulling the blanket over themselves in the role of a source of quick, speculative income.

How to start investing in gold

In Ukraine, gold can be physically bought in banks in the form of coins or bars of different weights or in the form of ready-made jewelry in jewelry stores. You can sell bars and coins again in banks, and jewelry (including in the form of scrap) – in pawn shops.

There are also alternative forms of investing money in precious metals:

• When dealing with banks, a metal deposit (or metal deposit account). In this case, you entrust your precious metals to the bank, which counts you interest depending on the change of quotations of the value of the asset in the market, taking into account the fluctuations of world currencies. Not all Ukrainian banks realize this service. You can either buy gold physically and give it to the bank, or it can be held as a deposit “without physical delivery”. Your income will be calculated in precious metals. There should be tax advantages with this scheme.
• Exchange-traded instruments. This could be buying shares in an ETF fund (exchange traded index fund) or futures contracts. Such transactions are conducted by professional traders and give great opportunities for portfolio diversification, relatively high profitability and efficiency and flexibility in conducting transactions.

Investing in gold and silver: difference of approaches

Which metals are worth investing in which case? Despite the fact that gold is considered to be the most familiar metal for investment, transactions with silver also have a pronounced demand, which is explained by the following factors:

• Silver is cheaper and is more accessible for investors with small capital.
• The high volatility of the price of the asset provides an opportunity to make money on it in the short term. 

In other words, large investors invest in gold because it serves as a protective asset in their portfolio, while traders use silver as a way to profit from fluctuations in its price.

How precious metals are stored

Gold, silver and platinum group metals are considered to be the main precious materials. Often, owners choose to store their assets in precious metals near their physical location and find ways to store them in their home. 

However, each type of metal requires specific storage conditions and this cannot be overlooked. For example, gold is a soft metal that is susceptible to various types of mechanical damage and tarnishing. Silver – takes up a lot of space and is afraid of moisture. Precious metals should preferably be stored separately from each other in a cool, dry place.

For investors who are not experts in precious metals and are not sure that they want to store expensive assets in their homes, there are special vaults that meet all safety standards and provide the required storage conditions.There are separate companies that guarantee owners complete confidentiality. This industry is most developed in the world in such countries as Switzerland, Austria and Singapore. Also, most Ukrainian banks with well-developed office infrastructure offer storage of precious metals in safe deposit boxes of different types and sizes.

For our part, we wish you good luck on the way of choosing the best investment. If you correctly assess your opportunities and anticipated risks, you are sure to become a successful investor.

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