Millennials are known to have different preferences and ways of thinking compared to older generations. Yet, gold investment remains one of the go-to investments for them. Why is that?
Our fondness for gold is certainly nothing new. The use of the shiny yellow metal actually dates back to 5,000 years ago in ancient Egypt. The role of gold was so important that it was used to build many important buildings and statues, including the capstones on the Pyramids of Giza. Since then, gold has been used in various civilizations around the world, mostly as a form of investment and a symbol of wealth.
Aside from that, gold was also used by our ancestors as an all-weather investing strategy to protect them from any kind of financial disaster. As a result, it became an integral component of global economic and cultural existence. Even today, gold is still considered one of the best investments during economic uncertainty, making it appealing to investors with various backgrounds, ages, and countries of origin.
Gold even captured the attention of millennial investors, who are mostly known to have different perspectives and approaches to life compared to the previous generations. The main reason is that they were born and raised in a massive era of technology and economic development. Hence, they naturally developed a rather new way of thinking in practically all activities, including eating habits, vacations, fashion preferences, and even investing. So, it is quite interesting to see that one of Britain's top producers of bullion coins, the Royal Mint, reported in 2020 that there was an "unprecedented demand" for gold bullion coins and bars dominated by millennial investors.
How to Invest in Gold
There are several ways that you can choose to invest in gold, namely:
Traditionally, people could only buy gold in its physical form, like jewelry or metal bars. Even so, physical gold is still popular to this day and perhaps will never diminish, especially in India since it's a part of the country's cultural tradition. However, some things certainly have changed in line with technological development and market expectations.
See Also: Understanding Spot Gold Vs Futures Gold
Many gold companies are now selling their products in online marketplaces in a hope that they'll attract younger customers. Some companies even offer customization and a free home trial, which is actually pretty common in the old days for reputable families. So, with companies keep finding new innovations like this, buying physical gold can actually be quite an attractive option for millennials.
Where to Store the Purchased Gold
Storing physical gold is highly important for the safety of your asset, so it might cost you a fortune. The first option is to store your gold purchases yourself. You can keep them at home in a safe, but make sure to inform your home insurer first. Every time you buy new valuables like gold, you must always inform your insurer because changes in the market prices could leave you under or over-insured if you don't update your insurer regularly.
Alternatively, you can also ask the gold seller to keep the asset for you in exchange for a fee. However, this option is pretty risky because you basically entrust your precious assets to a third party, so make sure to purchase from a trusted seller.
If you find that owning physical gold is too much of a hassle, you can try investing in gold ETFs. In a nutshell, gold ETFs are ETFs based on gold prices and invested in gold bullion. It is similar to equity ETFs that track equity prices. Gold ETFs are traded on stock exchanges like Goldman Sachs Gold BEES for example. Also, this option can be cheaper because you won't need to buy whole bars or coins and don't have to pay for the cost of storage.
Another popular means to invest in gold is through mutual funds. It is considered one of the easiest and safest mediums of investment at the moment.
Hedge Against Uncertain Situations
While most assets don't perform well during inflation, the value of gold normally increases with inflation. In the last few decades, gold has shown incredible performance in comparison to other asset classes and it is more valuable today despite the ups and downs that we've seen.
See also: Gold Price Today
This is why the precious metal is often used as a hedge against difficult and unpredictable times from the early days until now. It is understandable that millennials prefer to invest in gold shortly after the COVID-19 pandemic started. They probably hoped that such investment would save them from extreme market fluctuations and risky situations.
Easy Investment and High Accessibility
Some assets would require investors to lock their funds for a certain period in return for higher interest rates. Unfortunately, this type of rule is not really suitable for millennials, especially those who work as entrepreneurs and business owners. Gold, however, is easy to buy and sell in the market and can be used at any time.
These days, buying gold is definitely easier than ever. The gold market is open to all investors and can be accessed via the internet. It's even possible to get exposure to gold without having to worry about storing the physical metal. There are many ways to access gold as an investment, so it's definitely a great opportunity to consider.
Various Investment Options
We've mentioned that millennials tend to live their lives differently than earlier generations. Thus, it is unsurprising that most millennials are more interested in innovative investments than conventional ones. They seek to try something new with high potential returns.
Although gold investment has been around for hundreds of years, the practice keeps adding new improvements here and there. For instance, instead of just buying the physical metal and storing it somewhere, investors can now buy paperless gold like Sovereign Gold Bonds (SGBs), Gold ETFs, Gold Companies, Digital Gold, and more. Therefore, the lure of gold remains strong in the market, both for older and young investors.
All investments are risky to some extent, but gold is one of the safest options out there. Newer assets like cryptocurrency might be more appealing to younger investors, but the risk involved is pretty big because the asset is highly volatile. So, it is common to use gold as a long-term investment due to its safety, shock resistance, great returns, and high liquidity.
Last but not least, gold is an excellent option for portfolio diversification. All investors must understand that there is no such thing as risk-free investments. Hence, it's never a good idea to put all eggs in one basket and risk losing them all at once. An ideal portfolio should consist of different asset classes and perhaps different instruments within the classes that could save the investor from losing too much. Considering that the value of gold is very stable in general, investors can use the precious metal as a form of insurance or protection against turmoils in the market.
Yet, Investing in Gold is Not Without Risk
Gold is not considered a high-risk investment, but it is still risky nonetheless. First of all, it's important to consider that gold is not a passive income generator. Owning some gold in your vault and storing it for a long time won't give you any interest, dividends, or rental fees. You'll need to sell the metal in order to get profits. In addition, the cost of storage and transportation is also necessary to consider. Therefore, if you are looking for gaining wealth, it's better to find an asset that could make you richer.
Another thing to consider is that the performance of gold is actually not as good as you think and it could change from time to time. For instance, the booming of the stock market can cause a slower pace in gold prices. Thus, if you invest in gold, there's a chance that you won't get as much return in the long run as you would in other assets like stocks. This is why it's important to diversify your portfolio and combine several assets for maximum profit.
Lastly, just like any other asset, gold can be subject to price fluctuations. There are several factors that can pressure the price of gold, such as strong US dollar and lower demand (particularly from India and China). It is also worth mentioning that gold is more popular during specific events or crises such as the COVID-19 pandemic. Therefore, it's important to always pay close attention to price fluctuations and assess the current global condition.
The Bottom Line
In conclusion, gold investment continues to attract new investors and millennials as one of the safest investment options. Over the years, gold has come in various new forms, yet it remains a popular and valuable asset for worldwide investors. Recent innovations like Digital Gold and online gold markets have made the precious metal even more accessible to younger generations who are more connected than ever and always strive for new opportunities. Despite the existing risks, the stability of gold continues to find its way to millennials and secures its survival in the future.
Did you know? Cryptocurrency and gold may be the opposite when it comes to risk profiles. But there is something called gold-pegged cryptocurrency that may just combine the quality of the two. How so? Learn further in Understanding Gold-Pegged and USD-Pegged Cryptocurrencies.
Jul 16 2022
Is gold a good investment for beginners?
Jul 22 2022
Emmily: Gold is actually a very beginner-friendly asset because it is easy to acquire. It generally has a good balance between profitability and risk level, so it is considered a safer investment compared to other assets. If you're interested, you can buy gold in many different ways such as buying physical gold, investing in gold mining stocks, or buying gold bullions.
Jul 26 2022
What about investing in other precious metals like silver? Is it just as profitable as gold?
Aug 25 2022
Sasha Gerald: Alongside gold, silver is one of the oldest commodities to trade. Even though it's no longer used as currencies, but the price of silver is still rising and thus, it is still considered as a popular investment opportunity these days.
Aug 6 2022
Is gold a better investment than stocks?
Aug 25 2022
Lily Jammie: Generally speaking, gold is a safer investment compared to stocks. But as you might know already, "the higher the risk, the higher the return". Therefore, the answer depends on your trading goal, whether you want to invest in the long term, or you aim for getting high profits.
Aug 25 2022
Which one is better, investing in physical gold or digital gold?
Aug 25 2022
Yarah Klein: Both options has its own benefits and downsides. If you want to buy gold for financial purposes only, then opt for digital gold because the price is consistent everywhere and the buying procedure is well-regulated. Meanwhile, if you have other personal uses in mind, go for physical gold.
Sep 4 2022
What is the best website to buy gold?