• Home
  • Blog
  • Why gold is, and always will be, a safe haven for investors

Why gold is, and always will be, a safe haven for investors

Sophie Nicolas

By Sophie Nicolas

The fact that gold is rare, does not rust like other metals, is pliable and has a beautiful lustre - makes it a perfect precious metal. So let’s dive into the history of this shiny element.

The History of Gold

As far back as the time of the ancient Egyptians, gold was used especially for grand jewellery, ornaments and even in tomb decorations for royalty.

Gold was considered valuable by the Incas, in ancient Greece and even Sir Isaac Newton experimented with “Alchemy” for over 20 years to turn base metals into gold - a field that is now considered a pseudoscience.

It was as early as 700 BC when Lydian (modern-day Turkey) merchants produced the very first gold coins for trading goods and services. It was with this invention that the world would change forever, as we saw gold develop and thrive.

When banks decided that physical gold could be transferred to paper money in the late 1800s, it changed the game for the human race. Thus, the circulation of paper money began.

Why is gold still relevant today?

Since the beginning of humankind, we have always revered gold. Not only because it has cultural and symbolic value, but also because gold is backed by governments and central banks hold it as reserves. Therefore, it instils a feeling of trust in society.

Gold has been proven valuable in producing modern items such as in computers, awards and dentistry. For example, the first use of gold in dentistry was around 4000 years ago in Asia! Scholars found golden teeth replacements in old skulls, popular with chiefs and political figures of that time. Even 4000 years ago, gold was seen as a symbol of power and wealth.

So yes, gold is and will always be relevant and a safe haven for society. Gold has proven to be the precious metal we fall back on when all other currencies fail. Gold, even as a figure of speech, indicates something good or classy. If you’ve ever heard the expression: “It’s good as gold” or “It’s golden!” then you know the implications - gold is great!

Why are central banks buying and holding gold?

Central banks are big players in the gold market. Banks buying physical gold and exchanging it for paper money started in the late 1800s and from then on, we have held only cash. Central banks typically hold gold as a reserve asset. The reason for central banks holding gold ranges from store of value, to financial insurance to asset diversification.

Its historic reputation certifies it as a suitable safe-haven investment as the gold price usually increases during times of economic uncertainty. Gold holdings are classified as part of a country’s foreign currency reserves. Gold is considered the ultimate lifeline in the event that a system breaks down and is therefore the ultimate store of value.

In fact, central banks around the world are buying more gold than ever. In 2018, central bank gold buying reached the highest volume since 1967. This trend is still ongoing, as economic and political uncertainty is increasing around the globe.

What you need to know before you buy gold

If you’re thinking of buying and holding a precious commodity, here are a couple of things you should know first.

Gold is on the rise

At the beginning of the Corona crisis, you may have noticed a large decrease, as much as 12%, in the price of gold as a result of panic selling into cash. Since then, we’ve seen a steady increase again. We can only speculate this is due to gold being a fallback for investors in a time of economic uncertainty.

As mentioned in this article, investors will always see gold as a safe investment when the world takes an economic downturn.

When you buy gold from Bitpanda, it is physical gold

Bitpanda stores the equivalent of the share you buy in digitised gold in physical gold in a state-of-the-art security vault in Switzerland.

When you buy gold, silver or any other precious metal at Bitpanda, you are always the owner of a specific share of the real, physical metal! You can read more about how we store physical precious metals in this blog post.

Gold production is declining

The world may be running out of gold. There are very few large gold deposits left to mine and the human race has already extracted all of the “easy gold”. Therefore, we are forced to dig deeper into the earth to find the tiny nuggets.

The rate of gold mine discoveries has declined over the past three decades and many investors are taking the opportunity to invest in precious metals in order to have the comfort of holding physical gold.

Gold for your portfolio

To summarise, investors find gold to be a “safe haven investment” because throughout history: gold has always held onto its value.Not only is gold great for portfolio diversification, but it is also a fallback for when the economy faces economic uncertainty, something that is highly relevant in these times.

We invest in gold because we trust it as the very first form of meaningful payment and just maybe, as an emotional tie back to our early ancestors.

Start investing in gold and other precious metals here and make your portfolio shine.

Sophie Nicolas

Sophie Nicolas