Is It Profitable to Invest in Gold?
If we take a closer look at gold, we will see that this precious metal always enjoys demand, Valery Polkhovsky, a senior analyst at FOREX CLUB Group of Companies, said in an interview with the Economy of Belarus Magazine.
There are periods when prices for gold go down but they swiftly recover to the previous maximum. It is unlikely that this historical trend will be broken. The price per troy ounce of gold in 2017 will be about $1,300-1,400. In the next 10 years we may see it hit the mark of $1,900, as was the case in 2011, Valery Polkhovsky noted.
During the global economic crisis, in 2008 the gold was in great demand as an asset-protection tool. Back then the U.S. Federal Reserve System launched a QE program (to bail out large corporations, banks and private enterprises by buying back their distressed debt). With fears of hyperinflation running high, many turned to gold as an asset-protection tool. As a result, the price gradually rose to $1,900 per troy ounce. “Once the hyperinflation fears were alleviated, gold went down in value and today this precious metal costs $1,200 per troy ounce,” the expert said.
Still, is gold an instrument to protect your wealth or multiply your money? Valery Polkhovsky pointed out that everything depends on the time this asset is purchased and sold. “Let’s assume you decide to sell the gold that you bought at $1,900 per ounce in 2011 at today’s price of $1,200. You will hardly be happy with the deal. However, if you had bought gold before 2011 when the price was $800, you would have a 50% profit now,” Valery Polkhovsky said.
In general, it takes time for gold to produce investment income. This is why gold is considered, first of all, as an investment rather than a speculative instrument. The gold spread (the difference between the buying and selling prices) is much higher than that in the foreign currency trade.
Valery Polkhovsky stressed that gold is not the most popular investment instrument in Belarus.
Gold is not the most popular investment instrument in Belarus
“When you buy a gold bullion from the National Bank of the Republic of Belarus, most likely you will be able to sell it only to the National Bank of the Republic of Belarus. You will encounter difficulties selling the gold abroad, since foreign banks rarely accept gold bars issued by a different bank. By the way, in the Russian Federation, this investment instrument is even less popular due to a number of factors. For instance, bullion bars are subject to VAT in Russia,” Valery Polkhovsky explained.
There are periods when prices for gold go down but they swiftly recover to the previous maximum