How to invest in gold ?

Gold is not a financial product like any other. Life insurance, real estate or stocks allow you to generate interest, and therefore multiply profits. Gold does not work the same way. The gold metal is independent and is not subject to stock market fluctuations. This is one of the reasons why governments and central banks build up gold reserves. In France, the Banque de France holds more than 2,400 tonnes of gold, or almost a quarter of the European Union's reserves. In the event of a problem with stock prices, gold is not affected or rather, it does not collapse. On the contrary, investors, seeing crises coming, will turn to safe values, including precious metals. It offers a real advantage compared to other products: it cushions losses. In the past, patterns have shown that the price of gold has exploded during various crises.

Gold is also a way to protect against inflation. Central banks can create money. Flooding countries with new money lowers the value of the currency, creating inflation. This is the very principle of scarcity. If the currency totally devalues, or even disappears, your gold is spared. It plays this role perfectly during major crises, where declines or fluctuations generate great risks and significant losses.

You can opt for paper gold. Instead of physical gold, a bar for example, you buy an ETF or a share of a gold company. You do not hold the gold directly but you bet on the good health of the company or the price. It is an effective way to obtain profits, impossible with physical gold. But then, can the resale of physical gold generate profits if the price increases ? The profits concern stocks or company shares. If you sell your bullion for more, you will then obtain a capital gain.

Investing in gold can be done in several ways. They each have advantages, but also disadvantages. You need to know about it to be able to properly invest in gold and silver.

Purchasing physical goldPurchasing physical gold

Physical gold can be purchased via two means:

• Ingots and ingots (weight less than 500 grams);
• Collectible or investment gold coins.

Bullion coins must:

• Having been drawn after 1800;
• Have been legal tender;
• Be made with at least 90% pure metal;
• Do not have a premium greater than 80%.

In France, the purchase of gold is exempt from VAT. In addition, the holding of gold is not included in the calculation of the IFI.

Finally, any sale of physical gold is regulated by the Tax Code. Under certain conditions, you will have to pay taxes.

The purchase of paper gold

Unlike physical gold, paper gold is equivalent to holding gold indirectly. So, you do not hold any gold bars at home, but you are the owner:

• One or more shares of mining companies. You can also be a shareholder via SICAV and FCP;
• Trackers and other ETFs.

Paper gold is ideal for profitability. More volatile, it allows you to buy and sell stocks quickly and accumulate profits.

The price of raw materials experiences regular fluctuations. The London Bullion Market Association, based in London, determines the spot price of gold twice a day. This quotation makes it possible to set the price of gold during transactions.

Can the price of gold increase ?

The price of gold is set according to several criteria:

• The economic policy of central banks;
• Geopolitical hazards;
• Supply and demand.

For several years, China and India have decided to invest in gold. They buy tons of gold and build up large reserves. This demand, accompanied by that of manufacturers and jewelers, increases the price. However, the quotation makes it possible to smooth the price between supply and demand, which guarantees price stability.

Conversely, the outbreak of the war in Ukraine allowed gold to reach one of its highest levels. It ended up stabilizing over the months, but the global economic situation is pushing investors to look into acquiring gold bars. This is why the current price is not falling and is destined to rise.

What are the risks ?

The first risk of investing in gold lies in its price. It can increase or decrease. Even if the price generally remains stable over a long period, no guarantee can be given as to the good health of gold.

If you decide to invest in paper gold, the risks are many and varied:

• ETF: they follow the price of gold, the risk is therefore moderate;
• Wanting performance: leverage can make you earn large sums of money. Conversely, they can also make you lose a lot of money proportionally;
• Shares in gold mining companies: you acquire a share of the company. If it does well, you make money, if it doesn't, you lose money. You can opt for SICAVs and FCPs to diversify and reduce the risks associated with gold companies.

Gold Union offers you a range of gold coins and gold bars of various sizes, for all your investment needs. Ask advice from one of our experts in agency or via our e-commerce site. They will support you in your procedures and in the choice of your bars.