28 Reasons to Buy Physical Gold

BullionStar's picture

Submitted by BullionStar.com

Throughout human history, gold has constantly emerged as an unparalleled form of savings, investment and wealth preservation. Due to its unique characteristics and features, gold has inherent value and cannot be debased. When holding physical gold, there is no counterparty risk or default risk. Wealth in the form of gold can also be held and stored anonymously.

From its ability to retain its purchasing power over time, to its safe haven status in times of financial turmoil, to gold's ability to diversify investment risk, there are many and varied reasons to own physical gold in the form of investment grade gold bars and gold coins.

1. Tangible with Inherent Value

Physical gold is real and tangible. It is indestructible, impossible to create artificially, and difficult to counterfeit. Mining physical gold is arduous and costly. Physical gold therefore has inherent value and worth. In contrast, paper money doesn't have any inherent value.

2. No Counterparty Risk

Physical gold has no counterparty risk. When you hold and own gold bars and gold coins outright, there is no counterparty. In contrast, paper gold (gold futures, gold certificates, gold-backed ETFs) all involve counterparty risk.

3. Scarcity

Gold deposits are relatively scarce across the world and difficult to mine and extract. New supply of physical gold is therefore limited and explains why gold is a precious metal. Gold's scarcity reinforces it's inherent value.

4. Cannot be Debased

Because of its physical characteristics and features, gold cannot be debased, and gold supply is immune to political meddling. Compare this to fiat money supplies which are constantly being debased and destroyed via deficit government spending, central bank quantitative easing and financial system bailouts. On a survivorship scale, gold has far outlived all fiat currencies by thousands of years.

5. Store of Value

Gold is a preeminent store of value. Physical gold, in the form of gold bars or gold coins, retains its purchasing power over long periods of time despite general increases in the price of goods and services.

In contrast, fiat currencies such as the US Dollar are not stores of value and their purchasing power consistently becomes eroded by inflation or the general increase in the price level. Fiat currencies have a long history of either becoming totally worthless and going out of circulation, or else becoming completely debased, such as the US dollar, while remaining in circulation.

Since the creation of the US Federal Reserve in 1913, the US dollar has lost over 98% of its value relative to gold, i.e. the US dollar has lost over 98% of its purchasing power relative to gold.

Since 1913, the US Dollar has lost more than 98% of its value, while gold has retained its value.

6. Long- Term Inflation Hedge

Physical gold’s ability to retain its purchasing power over time is sometimes referred to as the “Golden Constant”. This reflects the fact that gold’s purchasing power is constant over long periods of time. This ‘constant’ exists because the gold price adjusts to changes in inflation and future inflation expectations. Therefore, physical gold is a long-term hedge against inflation.

7. A 6000 Year History

Gold has played a central role in society for thousands of years from the early civilizations of ancient Egypt, right up to the contemporary era. Gold has facilitated international trade throughout history, has been directly responsible for the economic expansion and prosperity of numerous civilizations throughout history, and has even been, due to gold exploration and mining, the direct catalyst for the growth of some of today’s best-known cities such as San Francisco, Johannesburg, and Sydney.

8. A 2500 Year Track Record as Money

Because of its ability to retain value and act as a store of value, physical gold has been used as money for over 2500 years. Gold coins were first issued in the Lydian civilization in what is now modern Turkey. Subsequently gold was used as a stable form of money in Persia, ancient Greece, ancient Rome, the Spanish and Portuguese Empires, the British Empire, and right through to the various international gold standards of the 20th century.

It was only in August 1971 that the US famously suspended the convertibility of the US dollar into gold, a move which triggered the debt fueled expansion that is still having repercussions within today’s monetary system.

To put gold’s monetary importance into perspective, for 97% of the last 2500 years, gold has been chosen by numerous sophisticated civilizations as the form of money par excellence and an anchor of stability, precisely because of its ability to retain its value.

9. Safe Haven

Physical gold acts as a safe haven asset in times of conflict, war and geopolitical turmoil. During the financial market stresses and heightened uncertainties caused by wars, conflicts and turmoil, the counterparty risk of most financial assets spikes. But since physical gold does not have any counterparty risk, investors rush to gold during these periods so as to preserve their wealth. This is analogous to sheltering in a safe harbor. Gold can thus be seen as a form of financial insurance against catastrophe.

10. Portable Anonymous Wealth

Gold bars and gold coins combine high value with high portability. In times of conflict and war, gold bars and gold coins are ideal for transporting wealth and savings across borders and within conflict zones in an anonymous fashion.

11. Universal Acceptance

Gold is universally accepted as money across the world, with the highly liquid global market always providing ample sales opportunities for gold bars and gold coins. This means that whichever city you are in across the world, you can always sell or trade your gold bars and gold coins.

12. Emergency Money

Military personnel are often issued with gold coins that they carry with them in conflicts zones as a form of emergency universal money. For example, the British Ministry of Defense often issues RAF pilots and SAS soldiers with Gold Sovereign coins to carry on their persons during combat missions and activities, such as in the Middle East.

Worthless paper Currencies vs the Inherent Value of Owning Physical Gold

13. Outside the Banking System

In the current era of global financial repression, physical gold is one of the few assets outside the financial system. Gold is not issued by any monetary authority or central bank or government. Because its not issued by any government or central bank, gold is independent of the banking system. Fully owned physical gold, if stored in a non-bank vault or held in one’s possession, is outside the banking system.

14. No Default Risk

Unlike a government bond, there is also no default risk with gold because it is not issued by any authority that could default. Gold bars and gold coins are no one else’s liability. Physical gold cannot go bankrupt or become insolvent. Therefore, there is no need to have to trust any other party when holding physical gold.

15. Portfolio Diversification

Adding an investment in gold to an existing portfolio of other investment assets such as stocks and bonds, reduces the volatility (risk) of the investment portfolio and can increase portfolio returns. This is because the gold price has a low to negative correlation with the prices of most other financial assets, because gold is less influenced by business cycles and macro-economic cycles than most other assets.

Numerous empirical studies by financial academics, as well as industry bodies, such as the World Gold Council, have validated gold’s role as a strategic portfolio diversifier. Optimal allocations to gold in multi-asset portfolios have found to be in the 5% to 10% range.

16. Currency Hedge

There is generally an inverse relationship between the gold price and the US dollar, in that the gold price generally moves in opposite directions to the US dollar. Therefore, holding gold can act as a currency hedge of the US dollar, and help manage the currency risk of portfolios denominated in US dollars.

17. Gold's Metallic Properties

Gold has many and varied metallic properties. These properties provide gold with many technological and commercial applications and uses, which in turn contribute as additional demand drivers in addition to the investment and monetary demand for gold.

Gold is highly ductile (can be drawn into very thin wire). It is also highly malleable (can be hammered and flattened into very thin film). Gold is a very good conductor of electricity and heat. Gold does not corrode or tarnish. It is chemically unreactive and non-toxic to the human body. Gold has a high luster and shine, and an attractive yellow glow.

These properties explain gold’s use in electrical and electronic wiring and circuits (e.g. computers and internet switches), its use in the medical and dental fields, gold’s use in solar panels, space travel, and gold’s traditional uses in jewelry, decoration, and ornamentation. With new technological uses being found for gold all the time, gold's demand pattern is diversified and underpinned by its commercial importance.

18. Physical gold - A tiny fraction of Paper Gold

The London wholesale gold market and the US-based COMEX gold futures market generate huge trading volumes of paper gold that dwarf the size of the physical gold market. However, these markets only trade derivatives on gold (futures and unallocated positions), representing fractionally-backed and unbacked claims on gold that could never be convertible into physical gold by claim holders.

In a scenario under which these paper gold markets became unsustainable, the prices of paper gold and physical gold would diverge, with the paper gold markets ceasing to trade and collapsing, and only physical gold retaining any real value. Physical gold is therefore an insurance against the collapse of the world's vast paper gold markets.

19. By Definition - Not an ETF

Physical gold Provides all the benefits that gold-backed Exchange Traded Funds (ETFs) do not. ETFs provide exposure to the gold price, not to gold. Holding physical gold is by definition direct exposure to gold. With most gold-backed ETFs, you cannot convert the units into gold and take delivery of the gold, and in many cases, the locations of the vaults are not even known. If holding physical allocated gold bars or gold coins in a vault, such as with BullionStar in Singapore, you can always take delivery.

Gold ETFs have many counterparty risks since there are many moving parts in an ETF such as a trustee, a custodian, and a sponsor / issuer. Physical gold has no counterparty risks. When you hold a gold-backed ETF, the quantity of gold backing the ETF declines over time due to management fees being offset against the gold holdings. When you hold physical gold, you always remain with 100% of the actual gold you first purchased. There is no erosion of holdings.

20. Anonymous Storage

Gold can be stored anonymously, either in your possession within your house or property, or in a vault in a jurisdiction, such as Singapore, that has no reporting requirements. Since gold has a high value to weight ratio, storing gold does not take up much space.

21. Independent of Internet

Owning physical gold is not reliant on having internet access and access to electronic wallets and cryptocurrency exchanges. Furthermore, gold cannot be stolen by hacking an electronic address or by transferring or deleting a number in a computer.

Owning Gold Coins and Gold Bars Provides Many and Varied Benefits

22. Real Gold is Measured by Weight

Physical gold is measured in weight, not through a number set by a politician or central banker. When you buy a 1 Kilo gold bar, or a 10 Tola gold bar, or a 1 troy ounce gold coin, or a 5 Tael gold bar, you will always have that gold bar or gold coin, irrespective of the fluctuations of fiat currencies.

While thinking of the value of physical gold in terms of a fiat currency might be convenient, a better way is to think of a gold holding in terms of weight.

23. Coins and Bars - Build a Collection

Buying investment gold bars and bullion gold coins allows you to build a diverse collection of bars and coins that are at the same time a fascinating pastime and a form of investment and saving.

Bullion gold coins from the world’s major mints are beautifully illustrated and often have a connection to history. Investment gold bars from the world's major gold refineries are distinctively different from each other and you can vary a collection by cast or minted bars, and a selection of weights.

24. Physical Gold Feels like Real Wealth

Physical gold feels like real wealth. When you hold ten 1 ounce gold coins in your hand, you intrinsically know that you are holding real wealth, gold that is scarce and that has been costly to produce.

25. Gold as Loan Collateral

Gold can be used as loan collateral. Since gold is highly liquid and valuable, it can be lent and used as a form of financing, and as a way of generating interest. The wholesale gold lending market between central banks and bullion banks is highly active. Likewise, retail gold holders can also in various ways lend their gold to receive financing or interest, with new innovations to do this arising all the time.

26. Central Banks hold Gold

Although the world’s central banks like to downplay the importance of gold because it competes with their fiat currencies, most central banks continue to hold substantial amounts of physical gold bars and gold coins in vaults around the world. They hold this gold as a reserve asset on their balance sheets, and they value this gold at market prices.

Like private gold investors, central banks hold physical gold because it is highly liquid, it lacks counterparty risk, and because gold is a safe haven or ‘war chest’ asset that acts as a financial insurance in times of crisis. Central banks also hold gold for the unpublished reason that if and when gold re-emerges at the centre of a new monetary system, these very same central banks will not be caught out having no gold.

27. Gold for Gifting

Gold coins and small gold bars make great gifts and presents, and gold is a traditional form of gifting in many societies around the world. Gifting a gold coin or small gold bar to mark a birth, or anniversary, or a wedding or other special occasion, is an ideal present that will be highly appreciated by the recipient.

28. Gold for Inheritance

Gold bars and gold coins are a great form of inheritance for your children and family members. Because gold is real, tangible, valuable, and has a highly liquid trading market, it is an ideal asset for inter-generational wealth transfers. Because physical gold is fabricated in convenient weight denominations, such as troy ounces and kilograms, it can be distributed equitably among recipients, and specified equitably in wills and trusts.

This article originally appeared on the BullionStar.com website under the same title "28 Reasons to Buy Physical Gold".

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PhilofOz's picture

"direct catalyst for the growth of some of today’s best-known cities such as San Francisco, Johannesburg, and Sydney."

Wrong!! Try Melbourne instead of Sydney. The gold found at Ballarat and surrounds grew Melbourne and drained the population of places like Sydney of those trying to get rich!

BullionStar's picture

NSW gold discoveries such as at Bathurst boosted Sydney before gold discoveries boosted Melbourne. Royal Mint in Sydney opened in 1855

https://sydneylivingmuseums.com.au/stories/short-history-mint

Royal Mint in Melbourne only opened in 1872.

Duc888's picture

 

 

"10. Portable Anonymous Wealth

Gold bars and gold coins combine high value with high portability. In times of conflict and war, gold bars and gold coins are ideal for transporting wealth and savings across borders and within conflict zones in an anonymous fashion."

 

OK, anyone have any real life experience flying commercial with a dozen 1 oz gold coins clinking around in your front pocket?  When TSA hands you the little plastic basket and tells you to toss your keys and stuff into it, do you just dump 12K worth of gold coins in there too?  I hear stories of 3-4K of ca$h being confiscated when driving across country..... how's the gold smuggling across borders work out?

JibjeResearch's picture

30. Gold can be made.... in a lab

wattie's picture

Join the Global Class action fightback against gold/silver manipulation!

http://www.leonkaye.co.uk/class-actions/possible-manipulation-gold-silve...

Investors from 18 countries around the world have signed up so far...will you?

Together we can end this.

www.goldclassaction.com

 

www.silverclassaction.com

jomama's picture

29. Most manipulated commodity in history

Lump's picture

I don't understand the reliance on gold as some sort of last

ditch exchange medium in times of disaster. Who's going to accept it

without demanding to assay and weigh it first? That Canadian fake

gold bar scandal must have cast a shadow on all physical gold

transactions.

 

Yellow_Snow's picture

BullionStar - What's U Selling?

Tyler's I hope you'll are getting ad revenue for these infomercials...

andrej's picture

Having some physical gold stashed somewhere certainly is a good idea, however, it will never circulate as money. Too clumsy.

https://www.youtube.com/watch?v=sN3iITo7gNA

Everyting depends on precise digital scales. The lowest transaction possible is 0.1 gram, the lowest quantity these scales are capable of measuring. Instead of doing something productive, like rising crops, people are digging for gold.

 

A1 T's picture

This article is a sales pitch.

Rock On Roger's picture

Humans will always dig for gold. We were bred as slaves for the goldmines of the gods.

38BWD22's picture

 

 

Well, yeah, in some cases.  They dig, I buy.  Smile.

Pearson365's picture

The jig is up for Cryptos.  Smart money is now flooding into gold and silver.  The November price strength proves it.

zagzigga's picture

Sorry, the ship has already sailed. A repeat of gold's "golden run" from the early 2000's-2010 is NOT going to happen this time. BTC has stolen gold's thunder and is the leader in the "speculation+insurance against market irrationality" space. On a fundamental level I do agree with the points listed in this article but without market participants showing much interest, gold will most likely continue its lackluster journey for the foreseeable future.

MrSteve's picture

and how many new 100s or 1000s of ETFs have hoovered up the fiat? In 1929, the "trusts" were buying up stocks and elevating their value; until they didn't. Who is trading BTC compared to buy and holding it? What is the liquidity into gold ounces or back into fiat?? days to clear? no stats, no data, just warm wet dreams of happy tomorrow. Tell me about that. I have seen bullion markets freeze and money market funds freeze: who makes a market in BTC when everybody wants to sell for gold buffalos, eagle, leafs or krugs?? Dealers will not hold any Old Maids while flushing out liquid assets, who will hold BTC?

NickPeeMe's picture

Because as a drug it can get you really high. In a pinch you can eat it. You can make weapons with it if you need to. Oh wait gold can't do any of those things but by all means you all stock up on that shit. It is very very valuable :)

Pearson365's picture

You've been munching on your greenbacks and bullets?  Yummy

Bananamerican's picture

and ONE reason not to.
It's manipulated...down 

wattie's picture

Join the Global Class action fightback against gold/silver manipulation!

http://www.leonkaye.co.uk/class-actions/possible-manipulation-gold-silve...

Investors from 18 countries around the world have signed up so far...will you?

Together we can end this.

www.goldclassaction.com

 

www.silverclassaction.com

falconflight's picture

And if the Internet is for whatever reason unavailable to the masses, what of Bitcoin?

Lost in translation's picture

A friend of ours works for CNI Los Angeles. Went in on Tuesday to say hello and catch up.

Though usually busy with regular, walk-in customers, the place was dead. Nothing but crickets.

When I asked why so slow, our pal said, “all of the money is moving to Bitcoin, now.”

Thethingreenline's picture

TTGL sold all mining stocks last week and waiting for funds to clear. Next step, transfer funds to banking account. Final step, placing it ALL in Bitcoin.

TTGL

38BWD22's picture

 

 

TTGL, IMO, was smart to sell all gold miners.  Riskier than gold itself!

TTGL may want to consider something like 60% physical gold, 40% (max!) BTC (and/or other cryptos), BTC has had a huge run. 

I am optimistic re BTC's price future going up, but NO ONE knows.

 

Disclosure: I am an owner of BTC who, alas, traded some in (at lower BTC prices) for gold.  But, the BTC I have left has all been "paid for" by buying gold along the way.

Acidtest Dummy's picture

In the event of a use being discovered for the soft yellow metal it would be better to already have some. QED

brushhog's picture

I'm going to market the first gold bullets. Trade them for their bullion value or shoot anyone who tries to take them from you ( can be retrieved later ). Its a win-win.

Spaced Out's picture

"28 Reasons to Buy Physical Gold", suggested by a bullion

 company.

Also on ZH today....28 reasons to buy a loaf of bread....by a baking company.

Also today on ZH...28 reasons to invest in the stock market.....by a stockbroker.

Gimme a fucking break!

SunRise's picture

This is fair and honest advertising!  The bullion dealer, baking company, stockbroker tells you right up front who they are.  They are motivated to sell, so you naturally can expect to find the best possible arguments from them to buy.  They're also motivated to give some of the strongest counter-arguments (which they know you will think of) and their best shot counter to those counters.  These folks are not claiming to be "journalists", i.e. disinterested 3rd parties - Thank God!

Carl Panzram's picture

Buy old gold coins, the new gold coins and bars have a lot of counterfeits. Bring your own acids...

Pearson365's picture

Screw acids.  Get the android app "bulliontest" and resonance test your bullion coins easily and safely.

snblitz's picture

I was watching an old twilight zone episode and a couple exchanged some coins.

It triggered a strange reaction in me that they we trading something of real value rather than the worthless coins of today.

Carl Panzram's picture

Was it the one with William Shatner was, in a diner, putting coins in the fortune teller machine? They asked the machine a question, and the machine told them what to do.

Silver Savior's picture

This is as close to a full explanation and validation of gold being a true king of assets to the anti metal group that  I  ever found. Although I am buying gold I think silver has been overlooked. 

With silver how do you convince a close minded investor that it is probably just as valuable if not more valuable than gold? There is this problem with critical thinking on the subject. 

People generally come to the conclusion that since there is X amount of silver in the Earth's crust above that of gold then it must be plentiful enough to not be in shortage etc. But how much of this silver is exactly extractible? Mines only operate in certain areas and concentrations have to be a certain amount for it to be extracted. 

The percentage of silver that's AVALIABLE for investment is less than gold. Why don't people get this?

MaxThrust's picture

Silver may be come in the future the medium of exchange but if the central banks decide Gold should back fiat then gold will become scarce and highly valued.

Both metals have their place in a non banker world. (that's a world were all the "evil" bankers haver been Guillotined)

 

PS: Not all bankers are evil, just some. Many of the evil ones are chosenites.

Lost in translation's picture

Q: why don’t people get this?

A: Normalcy bias.

Nobodys Home's picture

From what I can gather, there is about 17 times more silver than gold in the earth. Thus the long standing silver/gold ratio of 17:1. It's only very recently it's gone to 60s - 72:1
So, just getting back to standards used for thousands of years would boost the price of silver.
At $1.300 an ounce gold, silver would be $76.47 an ounce at 17:1.

Silver Savior's picture

But yet again that's "what's in the earth". If that supply is never recovered and put to use the numbers are dead. Silver can be under cities, under roads, in national parks etc. What's the probability of it ever being mined? And is most of it so thinly spread out that concentrations will not be worth mining at any cost? Furthermore why do we have physical silver defecits year after year? 

Something is just not adding up. If I am wrong or right I will still have 1000 ounces of it to wager on the idea.

Gods's picture

I started out with silver then the shit started to take up space even use my 100z bars for door stops. Had to switch to gold and My new favored silver Platinum lots and lots of Platinum. I also, like crypto coins that shit is banking me some serious dough. 

38BWD22's picture

 

 

Yeah, I like platinum too.  "Value dense"

Silver Savior's picture

What's wrong with silver taking up space? Better that taking up space than just junk.

atomic balm's picture

above ground mined gold 5 billion troy ounces

 

above ground mined silver 56 billion troy ounces

Silver Savior's picture

It appears you are not taking into account that silver gets used up in industry and is then mostly discarded. Only about 10% of gold is used for industrial purposes so there is a lot more gold "avaliable" for investment. 

Gods's picture

so silver should be around 110/oz

Silver Savior's picture

Silver should be more like $1500 based on my research going back to 2013. But nothing to see here.

Anonymous_Beneficiary's picture

Did your research consist of mostly Jason Hommel articles? LOL

Nobodys Home's picture

That's how I look at it too. Also, most is a by product of mining other commodities....copper nickel etc. So one good economic downturn and there is even more of a scarcity.

KingdomKum's picture

we few, we happy few,  we band of silver holders  .  .  .

Food Loaf Junkie's picture

You can also buy many vintage/antique gold coins at semi-bullion prices such as British sovereigns, French and Swiss 20 francs, German 20 marks, Russian 5 and 10 roubles and many others.  The british sovereign is the most recognized gold coin in the world and would be my choice to travel with in emergency anywhere out of the U.S.  :-)