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Gold : Investment, Currency or Trading?

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Gold is a metal that has a long history, throughout human civilization. Gold is classified as a precious metal, because it is chemically difficult to react with many other chemicals. In addition, all civilizations in this world recognize gold as a precious and high-value metal. So it is not surprising, throughout human history the struggle for gold mining resources is not unusual.

Even in ancient civilizations, gold has always been a symbol of prosperity, wealth and prestige. Since the days of the kings of Ancient Egypt, until now gold has always been synonymous with luxury and a symbol of wealth. So it is not surprising, sometimes gold becomes a source of conflict between nations and even a source of war between nations.

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Gold as a medium of exchange has been known since ancient human civilization, along with silver. Like two lovebirds, gold and silver have always been a symbol of wealth and a medium of trade in ancient times. In nature, gold and silver can also be found at the same location. Together with copper, which is an element of group VII A these three metals are bonded in the structure of Cu-Ag-Au. So in a copper mine, there will definitely be gold and vice versa.

In modern times, gold itself has changed its designation. Although now it is no longer a medium of exchange, but its function as a store of wealth is still valid. In fact, even more sophisticated gold can be used as an investment tool and can also be traded, both physically and in value. The value of gold which is believed to be always immune to inflation makes gold one of the star of investment.

How about gold as an investment tool? As mentioned above, the value of gold which is always stable and anti-inflation makes it a hedging tool. Even if calculated with fiat money the value of 1 gram of gold is quite high. In addition, its small and easily stored form allows gold to act as an investment tool. According to the data, the value of gold relative to the USD alone has gone up from $ 35 in 1970 to $ 1,300, aka a nearly 40x increase! Even in 2010, the price of gold had touched $ 1,900. In rupiah, in 2000 the price of gold per gram was around Rp. 150,000, and now in 2019, the price of gold is around Rp. 600,000, a 4-fold increase in 20 years.

In Indonesia, there are several companies that sell their gold products, but the most famous is the SOE named Antam. This BUMN is famous for producing mining goods, including gold. Even further, Antam has opened several gold boutique outlets in several major cities.

Which is better, buying physical or non-physical gold? The answer is returned to each person. How to buy physical gold is to come directly to gold sales outlets such as Antam, Pegadaian or gold shops in Indonesia. Better to buy gold in the form of bars if you intend to want to invest than to buy gold in the form of jewelry. Why? Because if we want to sell the jewelry back, the shop will cut the price for reasons of wage costs for making jewelry or because gold is not bought from their store.

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Tips on buying gold bars for investment:

  1. Make sure every gold has an official certificate, for example a certificate issued by Antam.
  2. Save gold in a Safe Deposit Box. Even better if kept in a bank.
  3. Pay attention to the price of gold, so we can compare one place to another.
  4. The cost of producing 1 gram of gold and 100 grams of gold is same. Therefore, the selling price of 1 gram of gold is far more expensive than 100 grams of gold, if calculated on a gram basis.
  5. Use idle funds, do not use funds for payment of daily bills to buy gold.
  6. Do not easily believe in fraud or things that can double wealth by buying gold.
  7. Physical gold investment is a type of long-term investment. Do not easily panic or be tempted by fluctuations in the short term.

Nowadays, online shopper also has some gold purchasing features. Pegadaian even has a gold saving program, starting from Rp. 5,000. Gold which is purchased then stored in digital form, the conversion is according to the prevailing gold price.

Gold as a currency is nothing new. Although there are currently no countries that use gold as their official currency anymore, gold as a medium of exchange is not immediately lost its role. It is said that each pilot carries a piece of gold in his bag every time he travel as a backup when landing in an unfamiliar place. Gold as a currency is now trying to be raised again, with dinars – dirhams or using US gold coins as a transaction tool. But keep in mind, the law in Indonesia prohibits sale and purchase transactions in any form other than rupiah.

Lack of gold as a currency is illiquid. That is, gold cannot be printed haphazardly following economic development. As a result, there is often a devaluation of goods prices. In addition, the sometimes corrupt ruler’s policy also makes gold as a manipulated currency such as reducing the size of the coins, adding other metals that are cheaper or other things that make gold go down in value. Since 1971, the USA officially gave up ties with gold and as a result, there is no gold-based currency in the world.

After 1971, the position of gold as a currency disappeared and only left as a hedge and investment tool. Initially, gold investment is the traditional way, in the form of purchasing gold bars or jewelry. As time goes by, gold can now also be traded online through brokers. Forex brokers usually also have gold items, with XAU codes to be traded by their members. The thing to remember, this gold trading is only trading in the value of gold. The advantages are:

  1. Can make a profit in a state of rising or falling gold prices, such as forex.
  2. Can be done anywhere as long as there is still an internet signal.
  3. No need for large capital, because every broker has leverage. With a small capital, can already trade gold with an equivalent value of 1 troy ounce (31.1 grams).

The disadvantages include:

  1. Can result in loss if not careful in trading.
  2. For some people, this transaction is still quite difficult because they are not yet familiar with forex and broker trading.

There is one more gold trading instrument namely ETF shares gold, more or less like a gold-based mutual fund. Each ETF will be pegged with a certain gold value, which is then traded like a mutual fund. It’s just that, in Indonesia there is no trading system like this, there are only foreign countries such as the USA. Maybe the regulator should be able to issue regulations to allow this type of mutual fund to apply in Indonesia.

In the end, the decision to turn gold into an investment tool, currency or tradable commodity, returned to everyone. The thing to remember, gold is just a means to achieve the financial targets that you expect. Whether you expect to maintain the value of wealth, or increase the value of relative wealth, all that can be done with gold.

 

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