Beware of fraudsters: you should clarify these points
Daring fraudsters are now bringing counterfeit bars and coins onto the market so cleverly that they are sometimes not even recognized by bank employees. It is in fact irrelevant and only a question of your personal taste whether you buy Krugerrand, Philharmonic or Maple Leaf coins. But it is important where you buy. And last but not least: where you may sell and get a reasonable price. Some things to look out for are:
- How should your gold investment be optimally structured?
- Where is the best place to keep your gold treasures?
- What insurance coverage is there?
- Is gold jewelry a worthwhile investment?
- Why does the Krugerrand shimmer red-gold?
- What are the different alloys all about?
- Why is white gold white?
- How can you buy gold anonymously through completely legal bar shops?
The importance of gold
But you may not want to buy any physical gold at all, i.e. coins or bars, and would rather opt for "golden securities" - from gold mining stocks to gold certificates, ETCs and ETFs to derivatives.
For some, gold is just a form of investment that is treated with as much rationality as, for example, a share. For others, gold - and not just in the form of jewelry - also has a high emotional added value, which can sometimes lead them astray. "I have loved its color, its shine, its divine heaviness all my life," enthuses Goldfinger in the James Bond film of the same name. In the end he was not happy, as all 007 fans know.
Gold alone does not make you happy
The same applies to the legendary Midas, according to the Greek legend the son of Gordios and Kybele, who - according to the myth - was said to be as greedy as stupid. In order to compensate for at least the last-mentioned handicap, he captured the wise Silenos. But Midas could not benefit from his cleverness, on the contrary. When Dionysos, a student of Silenos, asked the king to release the prisoner, Midas had to fulfill one wish: from now on, everything he touched should turn to gold. The wish was granted to him - and soon the greedy Midas should find out that one cannot eat and drink gold. If bread and fine wine change to gold when they are touched, you threaten to starve and die of thirst.
These two anecdotes demonstrate the ambivalence of the yellow precious metal. On the one hand, there is a lot to be said for investing part of your assets in long-term stable gold, which also has tax advantages, as I will explain to you shortly. On the other hand, too much gold in the depot can pose an increased risk. Because sometimes the fluctuation intensity of the precious metal (volatility) is even more pronounced than for stocks. An example: In 2013, the gold price fluctuated between $ 1.670 and $ 1.220. After all, that made a difference of 37 percent. Remember: if the price of gold falls by 50 percent, it will have to increase by 100 percent to return to the starting level. In the long term, however, gold has proven to be very stable in value. It survived wars, economic crises and currency reforms. This is why the precious metal is still considered a "safe haven" to which investors like to flee when something is brewing somewhere.
The best investment: real assets or shares?
Real assets gold - the advantages and disadvantages Precious metals such as gold and silver belong to the so-called real assets, just like real estate and shares. On the other hand, cash, but also all classic forms of savings and bonds, represent monetary values. This means that you save money, get interest in the best case and trust that you can still use this money to purchase goods or services in many years without that central banks or governments rob you of part of your reserves by, for example, a currency cut.
But what tangible assets should you invest in now? What are the advantages, but also the disadvantages, of a gold investment? The recommendation is not new, but it has to be repeated from time to time to prevent investment imbalances: it is essential that you spread your reserves as broadly as possible and also build a kind of "iron reserve" to bear unpredictable financial burdens can, without having to sell gold coins or shares, the prices of which may then be at a low point. In other words, it's not about whether you should invest in gold or stocks with your assets, but in gold and stocks. The only question is how high the respective gold or equity quota should be in your portfolio. A gold share of 10 to 20 percent - depending on your personal security needs - seems appropriate in most cases.
Physical gold ownership and its special advantages
So what are the specific advantages of physical gold ownership (gold coins and bars) compared to the other classic real assets and shares? First of all, you secure a clear tax advantage with a gold investment. You can buy gold coins and bars free of VAT within the European Union. A big advantage over silver, platinum and palladium. But be careful: some collector coins are not exempt from VAT (I'll come back to this in more detail later). However, if you invest in Krügerrand, Maple Leaf, Philharmoniker, Panda & Co or in bars, then according to the current legal situation, no VAT is due.
Let's say the gold price rises by over 20 percent, and you want to sell your gold bars or coins two years after the purchase. In this case too, the Treasury is left empty-handed. But be careful: If you sell within the first twelve months after the purchase, you must tax the profits if they exceed 600 euros. Shares and other securities (including gold securities) are subject to the flat rate tax regardless of the holding period.
Acquisition of gold is possible anonymously
Another advantage: in times of increasingly transparent bank customers, the acquisition of physical gold may be one of the last ways to invest money anonymously. You can currently invest in gold in Germany up to a threshold of EUR 14.999,99 without having to legitimize yourself. If you go to the gold dealer with your spouse or partner and buy both for your own account, this limit will double. This means you can buy up to almost 30.000 euros of gold in this case without having to identify yourself. Gold is still suitable for the discreet and anonymous form of investment.
In contrast to "concrete gold", as real estate is often called, a gold investment does not require large sums. A few hundred euros are sufficient to get started. In addition, gold has no maintenance and repair costs, which is the rule with real estate. Gold is also a very mobile form of investment. At least if you are traveling within Germany. Because as soon as you travel abroad, special rules apply even within the EU.
No Europe without borders
Single market, common currency, whoever travels within the European Union (EU) must - if they want to avoid significant problems - pay attention to cash limits. This also applies to gold and other precious metals. The relevant customs regulations state literally: »Any person who enters cash or cash equivalent means of payment with a total value of 10.000 euros or more from a member state of the EU to Germany or leaves Germany to a member state of the EU must pay this amount to the Orally announce entry or exit during customs controls. «This also applies expressly to gold coins or bars.
If you enter or leave a non-EU country, you must provide cash and cash equivalent means of payment from 10.000 euros onwards without being asked (i.e. not only on request). This applies, for example, when traveling to Switzerland or Norway. Gold is also a form of insurance. If there is a stock market crash or political unrest, the gold price usually rises because investors are fleeing more "safely". Due to the high demand, the price rises. This has been the case in most, but not all, cases in the past. So there is no automatism.
Shares vs. gold
One advantage of shares is their high fungibility. To put it in a nutshell: stocks can be turned into money again quickly. With just a few clicks of the mouse, the papers are sold and the equivalent is credited to your clearing account. The fungibility of gold coins and bars is also high, although it takes a little longer compared to stocks to get the equivalent in your account in the event of a sale. Unless you sell your gold treasures at a local dealer and have the equivalent paid out in cash straight away. In this case, you conclude a so-called table shop.
As you know, when you buy stocks, you need a deposit. On the other hand, if you dare to keep your gold treasures at home and you do not need to buy a safe, there are no additional costs. But you take increased risks. You can find out how to minimize this in the appendix of this book.
The downside to gold, however, is that you don't get ongoing earnings. So you get neither dividends (as with shares) nor rental income (as with rented real estate). You only benefit from the price increase of the precious metal. And finally, coins and bars do not bring you any value, except that you can enjoy the yellow precious metal like goldfinger. In contrast, you can move into your property immediately and save rent.
So let's summarize the arguments for and against a gold investment:
- Property protected against inflation. Gold cannot be reproduced at will. The ECB may one day give away "helicopter money," but that doesn't work with gold.
- Regardless of strong fluctuations, gold has remained stable for centuries.
- »Safe haven« in the event of political or economic turbulence
- Discreet purchase still possible (up to 14.999,99 euros)
- Flexible and mobile
- Tax benefits (no VAT in the EU, no tax on realized sales profits after the 12-month holding period)
- Entry possible with relatively small sums
- Storage risk
- no dividends and interest, no rental income
- sometimes strong price fluctuations
- high risk of counterfeiting
- possible gold ban (as from 1933 in the USA)
- Risk of price manipulation
Gold anecdote: stewards as smugglers
The following incident from 2014 proves just how much gold is in demand in India. The background is the import restrictions for gold in India. As a consequence, this led to ever more creative forms of gold smuggling. In recent years, for example, an airline crew has secretly brought gold across the border.
Gold is said to have reached India illegally a total of 13 times. This is intended to circumvent the high import taxes. In addition to the aircraft toilet as an interim storage facility for gold couriers, golden threads in textiles and silver-plated gold, cases were known in which the precious metal was swallowed by smugglers to bring it through customs. The World Gold Council estimates that up to 250 tons of gold reach India illegally each year. This corresponds to a good third of what India officially introduced in previous years.
What factors are driving the markets?
The banker Nathan Mayer Rothschild (1777–1836) is said to have said with a wink that he knew only two people who were able to predict the development of the gold price. Unfortunately, these two people are always opposing opinions. This anecdote shows how difficult it is to predict the performance of the yellow precious metal. There are a number of criteria, but there are just as many exceptions to them. The main price factors are as follows:
1. The development of interest rates
Anyone who invests their money in gold receives no interest. However, in times when interest rates for savings products and bonds from countries with the highest credit ratings are close to zero or even "penalty interest rates" are calculated, this argument is of little importance. That is, low interest rates usually spur gold prices.
However, rising interest rates do not necessarily have to result in falling gold prices. If interest rates rise, market participants could interpret this as a sign of a foreseeable higher inflation rate. And fear of inflation has always been a driver of the gold price in the past.
2. Development of the dollar exchange rate
Like most commodities, the price of gold is usually quoted in US dollars. So when you put a gold bar in the safe, its value depends on two factors: a. How is the gold price developing? b. How is the US dollar developing against the euro? It has already happened that the gold price is falling, but investors in the euro zone have experienced less or no losses due to the weak dollar.
A simplified example should make this connection transparent. Suppose you buy gold for $ 5.000. To simplify the calculation, we assume a parity of dollars to euros. So: 1 dollar = 1 euro. You pay 5.000 euros for your gold investment, because that is exactly 5.000 US dollars. But if the dollar had only cost 0,88 euros at the time of purchase, you would only have had to pay around 4.400 euros. Basically, weak phases of the dollar are good for the gold price - and vice versa.
3. Geopolitical escalations and global financial crises
If a war breaks out at a critical point on earth, in which the nuclear powers, particularly the United States, Russia and China, are also directly or indirectly involved, this also usually leads to rising gold prices, at least until the conflict is de-escalated.
The same applies to financial crises. Immediately before the Lehmann bankruptcy, the demand for gold bars and coins was so high that numerous traders were sold out within a short period of time. Many investors had apparently already guessed that something was "up in the air" before the official bankruptcy, and invested in gold.
4. Demand from China and India
It is a bit strange: The price of gold is still largely determined by market participants in New York and London, although the demand for physical gold in China is many times higher. Experts therefore expect Shanghai to become the leading gold trading center one day not too far away. The middle class, which is growing in the Middle Kingdom, buys high-priced gold jewelry, and in China gold is almost considered money and the second currency alongside the yuan. Even if gold demand in this giant country has temporarily declined somewhat due to the economic slowdown, one can assume that demand will increase in the long term. Because the middle class that can afford gold is still growing.
There is also high gold demand in India. The yellow precious metal is valued there as wedding jewelry. Gold is partially sewn into saris. The impact of Indian demand on the gold price should not be underestimated. Gold is particularly in demand from September to November, when traditionally married on the subcontinent. one
According to a study by the Australian investment bank Macquarie in 2011, around 18 tons of gold are hoarded in Indian households, which at the time corresponded to a market value of around $ 950 billion, according to the Times of India. Some speculative gold investors therefore buy appropriate call warrants in good time in order to benefit from the comparatively small price increases in gold through the associated leverage effect. A few years ago, the Indian government introduced taxes on gold imports to fill the government's budgetary deficit. This slowed down the demand for gold. Experts, however, only expect a temporary slowdown.
5. Central bank purchases and sales
The central banks are still betting on gold. You will surely remember the occasionally very emotional discussions about the Deutsche Bundesbank's gold, which is largely kept in the USA.
The most important central banks in the world maintain a total gold reserve of around 32.000 tons (see table). If the central banks buy or sell gold on a large scale, its price can fall or rise significantly. In 1999, the 15 leading central banks committed themselves under the so-called “Washington Agreement” to selling no more than 500 tons of gold a year.
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