Gold vs Property

The property market is generally known for its relatively stable growth as an investment, although it is not immune to periods of decline. For many individuals, property represents their most substantial investment, but it comes with the drawback of being entirely illiquid, meaning it cannot be easily converted to cash.

Amidst a cost-of-living crisis, a recession, and repeated interest rate hikes, households are facing increased financial pressure, particularly with mortgage prices on the rise. As a result, the outlook for the housing market in the UK is now projected to involve several years of falling property prices.

These economic challenges and uncertainties have created a difficult environment for homeowners and potential buyers alike, and market conditions may continue to be turbulent in the foreseeable future. As with any investment, it is crucial for individuals to carefully assess their financial circumstances and consider the risks involved before making decisions in the property market.

When it comes to gold vs property, many investors might be surprised at the results. Rental properties have long been touted as a go-to asset for large investments. As a physical asset of high value, and providing ongoing income for as long as you own it, property seems like a winning choice. The reality, however, is that recent changes in legislation have significantly reduced the potential returns a buy-to-let property offers. Another factor to consider - one that is often underestimated by many investors looking to become landlords - is the stress involved in managing one or more properties. With mismanagement, your investment in property could turn into a stressful nightmare - one that could even result in a loss.


Over the past 20 years, both gold and silver have experienced significant growth and have outperformed other asset classes by a considerable margin. While most asset classes have managed to outpace inflation, the combined returns from gold and silver have been nearly four times higher than the average of other assets. On the other hand, money invested in a savings account over the same period would have lost value due to inflation.

To illustrate this point, consider the hypothetical value of an initial investment of £10,000 over 20 years in various assets:

  • In a bank current account, it would be worth £11,822
  • In a cash ISA, it would be worth £14,854
  • In ten-year government bonds, it would be worth £17,369
  • In the FTSE 100, it would be worth £41,195
  • In residential property, it would be worth £23,775
  • In silver, it would be worth £64,082
  • In gold, it would be worth £66,758

As evident from these figures, the growth in physical gold and silver products has resulted in substantial returns, and depending on individual circumstances, they may not be subject to capital gains tax.

It is important to note that historical performance is not necessarily indicative of future results, and investment decisions should always be made based on individual financial goals, risk tolerance, and thorough research. Tax implications can also vary depending on individual circumstances and the tax laws in the relevant jurisdiction. As such, seeking advice from a financial advisor is recommended before making any investment decisions.

The graph below indicates the annual Percentage Change over 20 Years – Gold up 10.3% – Sourced from World Gold Council.

The graph below tracks how much an investment made in 2000 of £10,000 in gold or property (represented by the UK House Price Index) would be worth, tracked against inflation.


GOLD INVESTMENT IN MORE DETAIL


A HISTORIC GLOBAL CURRENCY

Gold, as a form of currency, has been traded for millennia. During the 17th century, goldsmiths played a pivotal role in shaping the modern banking industry. The rarity and versatility of gold make it a universally accepted currency and the ultimate wealth reserve. To safeguard against financial risks, central banks and countries are obliged to maintain a specific proportion of their wealth in gold.

BENEFITS OF GOLD AS AN INVESTMENT

Amidst periods of uncertainty, individuals tend to shy away from investing in the stock market or keeping their funds in banks. Nevertheless, physical gold has consistently served as a secure method of preserving wealth, with its value increasing in response to demand, as observed during both the 2008 and 2020 economic events. Discover how you can take advantage of these benefits.


A POWERFUL ASSET FOR THE FUTURE

According to the World Gold Council's forecast for 2023, the outlook appears mixed and uncertain, considering various scenarios such as weak global economic growth, a weaker US dollar, and geopolitical tensions. However, they suggest that, overall, these diverse influences are likely to result in a stable yet positive performance for gold throughout the year.

GOLD AND SILVER AS ALTERNATIVES TO TRADITIONAL SAVINGS

Numerous individuals opt to invest in gold and silver as an alternative to traditional cash savings for several compelling reasons:

  • Hedging against Inflation: Precious metals like gold and silver have historically proven to be effective hedges against inflation. When the purchasing power of fiat currency declines due to inflationary pressures, the value of gold and silver typically rises, preserving wealth.
  • Protection during Economic Instability: During times of economic uncertainty or financial crises, gold and silver often act as a safe-haven, providing stability and security for investors. Their intrinsic value and limited supply make them reliable assets in tumultuous economic environments.
  • Diversification of Investment Portfolio: Including gold and silver in an investment portfolio can enhance diversification. These metals have a low correlation with traditional financial assets like stocks and bonds, reducing overall portfolio risk.
  • Potential for Higher Returns: Over the long term, gold and silver have demonstrated the potential for significant price appreciation. While they might not yield regular income like dividend-paying stocks, their value appreciation can lead to substantial returns over time.
  • Global Acceptance and Liquidity: Gold and silver are universally recognized and accepted across borders, making them easily exchangeable for various currencies or convertible to cash. Their high liquidity ensures quick and efficient transactions when needed.
  • Timeless Value: Throughout history, gold and silver have been considered stores of value and a form of money. Their enduring allure and widespread use as a medium of exchange ensure their continued relevance in the modern world.
  • Overall, investing in gold and silver can offer a sense of security, a means to safeguard wealth against economic challenges, and the potential for long-term financial growth.

INSURE YOUR SAVINGS AGAINST INFLATION

The example from 1920 clearly illustrates the enduring purchasing power of gold compared to currency over time. While a £20 note today may not be sufficient to cover a week's electricity bill, the 1oz gold coin can still pay for a week's rent. This demonstrates how gold has preserved its value, while the purchasing power of currency has steadily eroded due to inflation.

Given the relatively low interest rates (around 2-3% or even less) currently offered by savings accounts, some investors may question the wisdom of risking their hard-earned savings in these accounts. In an environment where inflation can outpace the interest earned, the real value of money stored in savings accounts can gradually diminish.

As a result, many individuals turn to gold as a means of safeguarding their wealth against inflation and economic uncertainties. Gold's historical resilience as a store of value and its potential for long-term growth make it an attractive option for diversifying investment portfolios and preserving purchasing power.

Ultimately, the decision to invest in gold or any other asset should be based on individual financial goals, risk tolerance, and the overall investment strategy. Consulting with a financial advisor can help you make informed choices that align with your specific circumstances and objectives.

ROI In the last 12 months


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