Planning to Buy Physical Gold? Know the Pros and Cons of it

Buying gold coins or gold bars is a way to have yourself a valuable asset that is handy and tangible. Did you ever give it a thought about what is to happen if there is a sudden, global economic crisis? It is this gold and other precious metals that will provide you security against any economic or geopolitical disaster.

But like everything in the world, this too isn’t 100% full-proof and has both pros and cons.

 Pros of buying physical gold

1. Hedge against inflation

It has been seen that inflation in the economy affects the value of money, and as time passes, the purchasing power of the dollar declines slowly. And one can notice this quite easily if he compares how cheap a thing was priced 10 years back, and how it is priced now.

2. As security during the bad times

 One of the primary reasons why people look forward to buying gold bars and gold coins is that because they know that over some time, gold prices will rise steadily. Of course, it is not always on the rising side. History shows that gold prices have dipped from time to time, but it also shows that they rose again. Experts on this note quite certainly conclude that the prices are going to be higher in 10-20 years from now.

3. Portfolio diversification

Experts believe that probably the biggest reason to buy gold bullion bars is portfolio diversification. A portfolio diversification performs well during the time of uncertainty and balances out the volatility. The presence of physical precious metals in your portfolio will save you from a stock market crash or a major economic depression.

But not everything can be good with anything. Things come with some cons too, and buying gold coins has some as well.

Cons of buying physical gold

1. Storing physical gold

Before buying gold bars, this may be the first question that arises in your mind, as to where you would store the gold bars. Will the sturdy safe at your home be okay? Or do you need to store them at the safe deposit in your bank? You may store it in the one you find convenient, but neither of the two is 100% safe from burglary.

2. Owning gold is not a passive income asset

Financial experts believe that you should make investments that will produce some investments in return. But owning precious metals does not match this requirement. If one wants to become wealthy from the assets they are owning, then the industry experts would not suggest buying precious metals.

Let’s read a story that Warren Buffet, the financial expert, had shared. When he was young, he bought a piece of land and realised that not only did the value of this land increase, but it will also give him money in return. He rented out his land to a local farmer and the latter paid him an annual rent, and after a few years, he used his money to buy more pieces of land and became a repeated system.

This system not only allowed him to own assets whose valuation increased with time but also gave him something in return regularly. 

3. Paying premiums

And finally, if you own gold, silver, or any other precious metal for that matter, you have to keep in mind the premiums and taxes that you ought to pay. When you buy a metal, you need to pay a premium, marked up from the market price, meaning that if you suffer a loss, you go through a loss equal to the current value of the gold, and the amount of premium that you have paid also gets added to it.

Even after all of these cons, financial experts would also encourage people to buy gold coins and bars, silver bullion bars, and other precious metals to secure their future and create a diversified portfolio.

What do you think?