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War is a very tricky subject - not all wars are created equal. This can make it hard to tell when war will start and when it will be bad for you. While many factors will affect where and how much money you put into your investments during wartime, one of the biggest ones will be currency risk - the risk that a currency will decline in value during the conflict.
During times of great unpredictability, such as war, people naturally search for ways to protect their wealth from depreciation. Gold is regarded as one of the most secure means of monetary storage. Gold, in theory, is always worth more than any other currency and is harder to come by; it's a good idea to buy some before war breaks out. But should you invest in gold during a war?
This writing will discuss whether investing in gold during a war is a good idea. We'll also cover why gold is an excellent investment, various ways you can invest in gold and reputable precious metal companies that can assist you in storing your gold safely.
How Does War Affect Market and Investment Assets?
Whenever a battle between two nations erupts, unrest is spread across the entire world and its financial markets. The countries involved in the war typically suspend their imports and exports, resulting in a disturbance not only in the markets of the two warring nations but also in many nearby nations.
For instance, due to the ongoing Russia-Ukraine war, Russia has stopped exporting oil to multiple nations, including Germany in Europe. The decrease in the amount of oil available in the country is likely to cause an increase in prices, thus leading to inflation.
Conversely, a war usually catalyzes the inflation of many currencies. In the case of oil, it's not just oil that is affected by war. The disruption in trade causes inflation of commodities and goods that are produced or imported with the proceeds from these commodities.
This is often the cause of a war's upward pressure on prices; increased demand for these commodities leads to price rises. This usually leads to a surge in commodity prices, increasing the currency's value. When this occurs, its values are also expected to rise more rapidly.
Why Invest in Gold?
For many reasons, investing in gold can be wise during conflict and financial instability.
Wealth Preservation
The effects of inflation cause the actual worth of money to dwindle with time. For example, $10 now purchases less than it did two decades ago. Gold is one option to maintain the actual value of your resources in terms of inflation.
During a time of substantial inflation – like what global economies are going through right now – investors may turn to gold as an actual physical asset that keeps its value. The idea is that gold is an appropriate defense against inflation as, hypothetically, higher demand for gold in times of inflation can cause a surge in gold prices.
Gold Has Always Been a Haven
Governments can manipulate their own currency's worth through decisions on interest rates and the amount of money in circulation. Unlike currency, gold's value depends on the market's supply and demand. Because of this, it is often viewed as a secure asset in times of economic and political uncertainty.
According to the World Gold Council (WGC), demand for gold was up 34% in the first three months of 2022, likely due to the conflict in Ukraine. The first quarter of 2022 was unstable, with events such as supply chain disruptions, geopolitical crises and increasing prices all leading to gold being considered a dependable source of value for retail and institutional investors.
Portfolio Diversification
Apart from money, stocks, bonds and real estate, gold is another type of asset that can give investors a chance to diversify their portfolios. This is significant because it can help protect against one type of asset, such as equities, failing to meet expectations. Gold is often referred to as possessing an 'opposite relationship' with other asset classes.
This implies that gold investment might generate a higher return if the stock exchange goes down due to high inflation and economic instability. This is one of the main reasons investors may choose gold as a form of investment during times of war.
How Can I Invest in Gold?
It is possible to put money into gold in multiple ways, depending on if you prefer investing directly in the valuable commodity or using an indirect form of investing.
Gold Bullions
Gold is available in many forms, such as bars, coins and jewelry. Gold bars are typically the most cost-effective way to purchase gold because they usually carry the lowest premium over the spot price. They come in various sizes and weights, ranging from 1 gram to 400 ounces—generally, the larger the bar, the lower the premium. Gold bars can also be stored in a safe deposit box or at home.
Gold coins are another popular form of gold investing. Gold coins are available in various sizes and weights, ranging from 1/10th of an ounce to 1 ounce. Gold coins generally carry a higher premium than gold bars due to their collectible value. Some popular gold coins include American Eagles, Canadian Maple Leafs and Austrian Philharmonics.
Gold jewelry is also a form of gold investing. It's important to note that gold jewelry usually carries a much higher premium than gold bars and coins due to its craftsmanship and design. When investing in gold jewelry, it's important to make sure you are purchasing authentic pieces.
Mining Stocks
Gold mining stocks are shares of companies producing gold through mining operations or refining from scrap sources. These stocks tend to be more volatile than buying physical gold, as a mining stock's share price mainly depends on the success or failure of the company's mining operations. Many gold mining stocks are listed on major stock exchanges and can be bought and sold like any other stock.
Investors looking to invest in gold mining stocks should pay attention to the company's track record, production costs, reserves and resources, cash flow and management team. Also, it is vital to look at the company's financial performance, including profits, cash flow and debt levels.
In addition, investors should consider the overall health of the gold mining industry and any potential political or environmental risks associated with the company.
ETFs
Exchange-traded funds (ETFs) are a great way to invest in gold. ETFs, provide investors with the ability to invest in gold without the need to store and secure physical gold. ETFs track the price of gold and often invest in physical gold bullion, gold futures contracts or gold mining stocks. ETFs can be purchased and sold on stock exchanges, which makes them highly liquid investments.
Unlike owning physical gold, ETFs offer investors a low-cost and convenient way to gain exposure to gold prices. By investing in an ETF, investors can take advantage of gold's potential for long-term appreciation or hedge against inflation or market volatility. Many ETFs also offer tax advantages for investors.
Gold Futures
A gold futures contract allows you to purchase a specified amount of gold at a predetermined price and date in the future. This type of investment allows investors to profit from rising gold prices without owning the metal physically. Gold futures can also protect against losses due to falling gold prices.
Gold futures are traded on various exchanges, including the COMEX and NYMEX divisions of the Chicago Mercantile Exchange, the Tokyo Commodity Exchange (TOCOM) and the Dubai Gold and Commodities Exchange (DGCX). To trade gold futures, investors must open an account with a broker and deposit sufficient funds to cover the initial margin requirement.
Gold futures contracts generally come in two sizes: a "mini" contract, which is equivalent to 1/10th of a standard gold futures contract and a standard contract, which is equivalent to 100 troy ounces of gold. The smaller size of a mini contract makes it more accessible for individual investors since the initial margin requirement is much lower than for a full-sized contract.
The price of gold futures contracts is determined by the spot price of gold plus an additional premium depending on the exchange and the specific terms of the contract. When the contract expires, the investor will either receive or pay the difference between the settlement price of the contract and the original purchase price.
Best Precious Metal Companies to Help with Gold Investment
For Investors looking to get into gold, an excellent place to start may be companies directly involved in producing and selling gold. These top five companies we recommend are leading the gold market.
#1. Goldco
Goldco is one of the leading precious metals companies in the United States and specializes in helping investors diversify their portfolios with gold, silver, platinum and palladium.
Goldco's mission is to help investors protect their retirement and other investments by providing a safe and secure way to invest in precious metals. Goldco offers various gold and silver products, including coins, bars, rounds and IRA-approved precious metals.
Goldco is committed to providing the highest customer service and making it easy for its customers to purchase, store and sell their precious metals. With their industry-leading expertise, Goldco's knowledgeable advisers can guide you through investing in gold, silver, platinum and palladium.
Goldco also offers a variety of IRA and 401(k) rollover options to help you preserve your retirement savings. It also offers a variety of tools, resources and educational materials to help its customers make informed decisions regarding their gold investment.
Their website contains helpful articles, videos, webinars and more to help educate customers on the importance of diversifying their assets with gold, silver and other precious metals.
Augusta Precious Metals is one of the best precious metal companies to help with gold investment. They are an industry leader in the precious metals investment industry, and their team of experts is highly knowledgeable about the gold market and the different types of gold investments available.
With Augusta Precious Metals, you can expect unparalleled customer service, low premiums on gold coins and bars and a wide selection of regularly updated products. They offer a secure online platform for managing investments and access to their expertly trained customer service staff.
You can also take advantage of their long-term storage options and discounts on larger gold purchases. Augusta Precious Metals is committed to helping customers achieve their investment goals and strives to make the gold investment process straightforward.
American Hartford Gold is one of the best precious metal companies to help with gold investment. They specialize in providing customers with various options for investing in gold, silver and other precious metals. They offer a wide selection of products, including coins, bars rounds and more.
American Hartford Gold also provides a secure storage option to help protect your investment. Their knowledgeable staff can help you determine the best way to invest in gold, whether buying physical gold or using a gold IRA account.
They also offer competitive prices on their products and assist in setting up your account. With American Hartford Gold, you can rest assured that your gold investments are safe.
#4. Birch Gold Group
Birch Gold Group is an excellent choice if you want a reliable and trustworthy precious metal company to help with gold investments. With over 15 years in business, they have extensive experience in the precious metals market and provide top-notch customer service and support.
They offer a wide selection of gold coins, bars, bullion and other rare metals such as silver, platinum and palladium. They also have an impressive array of IRA accounts, which can help you with retirement planning and portfolio diversification.
Birch Gold Group is a BBB-accredited business and has an A+ rating. Their prices are competitive, and their secure online ordering system allows you to quickly and easily purchase gold from the comfort of your own home.
Their customer service team is available to assist you with any questions or concerns that you may have. They also provide a secure storage facility for customers who want to store their gold purchases safely and securely.
#5. Noble Gold
Noble Gold offers various services, including gold and silver bullion, IRA accounts, coins and storage options. The company has been helping customers invest in precious metals since 2016, and they have earned an excellent reputation for its quality products, customer service and expertise.
They work with various clients, from individuals to larger institutions. Their primary focus is helping investors diversify their portfolios with physical gold and silver holdings. They offer gold and silver coins and bars in various sizes and purities.
Their selection includes American Eagles, Canadian Maple Leafs and other international coins. In addition to bullion, Noble Gold offers self-directed IRAs that allow investors to hold gold, silver, platinum and palladium in their retirement accounts. This type of IRA is a great way to diversify your portfolio and hedge against inflation.
The company also has a variety of storage solutions that can help keep your investments safe and secure. They offer both domestic and international storage solutions.
Final Thoughts
Gold investment can significantly add diversity to your portfolio and hedge against inflation. Gold has historically been viewed as a reliable store of value, and its price often rises during geopolitical uncertainty or economic turmoil. During wars, gold tends to appreciate due to increased demand for it as a safe asset.
Working with a trustworthy gold buyer will help make the process more seamless. With the number of gold companies on the market, it can be overwhelming to choose the best one. The companies listed here are some of the best precious metal companies in the business and can help you make informed decisions about your gold investments.