One of the most interesting investments for those who like to have a physical asset in their possession is gold. And those who think that way are not wrong. In times of crisis, gold is easy to convert into money. Those who noticed the flourishing of gold buying stores in the 2009 financial crisis can corroborate this.
In addition, experts remember that gold is a great asset at times when inflation (the prices of everything in general) rises. It is always smart to keep a certain amount of gold at home to convert into money in times of crisis or when inflation rises excessively gold ira companies.
However, if you decide to buy gold in the form of jewelry when things are going well for you or there is not much inflation, you will not be investing efficiently. There are several factors that suggest that the best way to invest in gold is through bars or coins. We tell you about them so that you can value them.
But to put everything in context, demand for gold for jewelry during the first three months of 2021 was 477 tons , while demand for gold for coins and bars was 339.5 tons, according to the World Gold Council.
Remember that gold always has a place in a diversified investment portfolio, the same as real estate or financial assets, to give some examples.
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The list of reasons to invest in bars or coins is very extensive. But if you think that buying jewelry is a better way to buy gold because you somehow enjoy your investment, you are wrong. The main reasons for buying physical gold in coins or bars are purity, taxation, price, liquidity, storage, utility or long-term investment.
Reasons to opt for buying gold in coins or bars
The main reason to invest in physical gold through coins or bars is its taxation. In the European Union, physical investment gold is exempt from VAT when pieces of two grams or more are purchased. In personal income tax, investment gold is taxed as capital gain (difference between the purchase price and the sale price).
Gold that is part of jewelry, on the other hand, is not considered investment gold from a legal point of view. For this reason, jewelry bears 21% VAT.
Another aspect that differentiates these two forms of investment in physical gold is purity. Let’s understand purity as the amount of pure gold that each piece contains. Well, investment gold measures its purity in thousandths and jewelry gold in carats. What is the difference?
The EU establishes that physical gold has a purity equal to or greater than 995 thousandths for ingots or bars, or 900 thousandths for coins minted after the year 1800 that have been or are legal tender in their country of origin and that are usually sold for a price no higher than 80% of the market value of the gold they contain.
However, the purity of jewelry gold is 18 carats, which means a purity of only 750 thousandths. This is because it is mixed with other metals to increase its durability and hardness. Pure gold is 24 karat, but it is too soft and easily deformed. Hence, in jewelry we talk about gold of different shades, since they have to do with the metals used: yellow gold has silver and copper; white, silver, copper, zinc or palladium; the pink, copper and silver; and black, ruthenium.
If we talk about price, that of ingots and coins is more controllable , because they do not have work that increases their price such as design, elaboration, artistic value, etc. Those who sold jewelry in stores that bought gold realized that they were not what they seemed because the work of the jeweler is not valued and the value of the alloy is reduced.
In line with this point, the liquidity of jewelry is nowhere near that of bars and coins. Investment gold is worth whatever the market indicates at any given time, while jewelry may not even be worth what the gold around it weighs.
On the other hand, storing investment gold is easier because its purity means it doesn’t get ugly no matter where you keep it. You can’t lose it either because you don’t need to remove it from its place of custody, something that can happen with jewelry.
Finally, the great advantage of investment gold is that it can be transferred without involving any type of attachment. Selling family jewels in times of need can be a difficult decision. However, selling a bar or coin, even if it came through a family inheritance, does not cause sentimental discomfort because it does not involve any attachment.
In conclusion, investing a small part of your portfolio in a physical asset like gold is a good investment. However, it is much more profitable to buy investment gold than jewelry. You can buy investment gold in pieces ranging from one gram to one kilo. Therefore it is accessible to all economies.