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What makes gold the ideal investment?

Updated: Jul 9, 2020

Andreas Hablützel, CEO, Degussa Goldhandel AG

Gold's value is enduring

Gold has served people around the world as a store of value for over 3,000 years. It is the only currency to have endured all this time, defying every crisis along the way. Gold has remained impervious to inflationary monetary policy and it cannot be reproduced by simply printing more of it. Gold is worth its weight in gold.

Gold is timeless

As the oldest documented discovery of gold jewellery (4,600 BC) would attest, humans have been fascinated with gold since the dawn of the earliest civilisations. Its allure has persisted through the ages. Gold shines as brightly today as it did then. The appeal of its impressive heft and warm feel is undiminished – if anything, it has increased.

Gold is in demand

Gold has become indispensable to modern society in recent decades. Wireless communication, computers, aerospace, medicine – the very domains that mean the most to modern man depend on this precious metal. Even the most sophisticated of technologies – nanotechnology – cannot do without gold, so it is sure to figure prominently in humankind’s future.

Play it safe - with gold:

Gold is the definitive stable investment. It has been revered and used as a valuable commodity for over 4,500 years. There is no substitute for gold on the jewellery market. It is frequently used in modern technology. And its long history as a reliable hedge against inflation speaks for itself. All this makes gold the safest stake you can hold.

Nearly 170,000 tonnes of gold have been mined in the past 5,000 years by people all over the world, only a few percent of which have been lost in the course of these many years.

This would appear to be an awful lot of gold, but it is actually a surprisingly small quantity. Its entirety would fit under Berlin’s landmark Brandenburg Gate with room to spare. A gold cube of that size would not only be remarkable for its weight; it would also cost a fortune. The world’s gold assets are collectively worth 6.6 trillion euros. But if every human on the planet were to be given an equal share, we would each get just 25 grams worth about 950 euros.

What’s more, most of this gold is unavailable: About two-thirds of it is bound in the form of jewellery and about 30,000 tons are stored in central banks’ vaults. These banks have reversed their policy of late. After the dollar’s ties to gold were severed, many sold some of their gold stores over the last 40 years. Now the trend is going in the other direction. Central banks have been net gold buyers since 2010, and this trend seems to be picking up even more momentum.

Other groups have also rediscovered the virtues of gold as an investment. These are times when governments of western industrial nations seem to have no qualms about running debts up to record highs. Central banks are practicing inflationary policies, printing new money seemingly at will. Currencies and financial markets look to be plunging into crises with increasing frequency. All this is driving demand for gold on the part of private and institutional investors. The first investors started turning to gold in 2001, and the rush was on when the financial crisis hit in 2008. Today investors see physical gold as an insurance policy for their portfolio.

Only about 2,650 tonnes of gold are mined each year, so supply cannot keep pace with growing demand. This has caused prices to climb steeply in recent years. In September 2011, the price rose to a record high of $ 1,920 per ounce before levelling off slightly.


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