Gold has played an important role in the economy of many countries throughout human history. Gold was considered a universal currency for a long time, an example of this is its use in the Byzantine Empire more than 1,500 years ago, while today many countries use it as a world reserve asset.
Due to the popularity of gold on a global level, many people want to buy this precious metal, however, some people want to buy gold thinking only in the “short term”, however, this may not be convenient for some individuals.
Not Spending Money We Need
Many people make the mistake of spending money they need to pay for things in the short term like utilities, education, food, etc. There are also cases of people using money they need in the medium term, such as to pay annual insurance premiums, annual taxes, travel, annual tuition, etc. It is only recommended to spend money that we have saved and that is not part of our monthly budget, for example, it is recommended to first develop the habit of saving and only when we have an amount saved (destined for investments) then it is only recommended to buy gold.
Ease Of Sale Or Liquidity
Although gold can be sold anywhere in the world, the truth is that said sale is not “immediate” but, depending on its presentation and level of purity, it can take a while to be sold. Due to this, it should be taken into account that gold is a more specialized sale and that said sale tends to take longer than other financial instruments such as shares, currencies of other countries, etc.
Ability To Increase Its Value
Although gold has the ability to increase its value, this growth is not exponential but occurs slightly or gradually. It is important to remember that the main reason many investors buy gold is to protect their wealth, as gold tends to retain its value over time.
While the value of gold can go up or down, such changes are very slight or gradual. In case the price decreases, the underlying value of gold does not change much, this is because a fixed amount of gold is a highly valuable commodity, in addition to having many practical uses such as electronics, jewelry, medicine ( dentistry), the glass industry, the aerospace industry, etc., while in the case of other alternatives such as the US dollar (which is a fiat currency), its price tends to fluctuate more because it does not have an inherent value, but depends on the value that people or states assign to it (in addition to the monetary policies of each country).
Hedge Against Inflation
Gold increases in value when inflation takes hold. Because of this, many investors buy gold to protect their wealth from external factors such as local currency inflation, inappropriate monetary policies, or conflicts/wars. That is, during times of instability, gold presents itself as an effective “safe haven” asset.
It Does Not Generate Dividends
Another reason for not recommending the purchase of gold in the short term is that gold does not generate dividends or passive income (as other instruments such as shares, fixed terms or bonds do, which do generate dividends and interest). However, the only return that can be obtained from gold is when it increases in value and we decide to sell it