In chemistry, gold (Au) is an element with atomic number 79, a heavy, soft, shiny, malleable and ductile (plastic) metal. But in everyday life, gold is associated with power and respect, because throughout history it has been identified with wealth.
The use of gold as money began thousands of years ago, with some of the first gold coins discovered dating back to the 8th century BC. when the Lydian king Croesus stood out for his extravagant wealth. The king was therefore among the first rulers to mint gold coins.
But gold is not a “barbarian relic.” It is still used in many cultures, including Turkey , India, China, as well as in developed economies as a long-term store of value.
It Preserves And Increases Its Value Over Time
Unlike the various fiat currencies around the world, gold holds its value and despite economic cycles, its price has only increased in the last three centuries, from $19.3 per ounce (in 1792) to $1,743.3 per ounce nowadays .
And we don’t even have to go back in time for that long. The last half century is also evidence of the almost constant rise in the price of gold.
Due to its durability – in monetary terms and as a physical asset – gold is also an extremely good means of inheritance. For example, even today, in some countries, gold is given as a wedding dowry. Which brings us to our second reason for investing in gold.
Gold Stores Immense Monetary Value In A Small Amount Of Metal
Given the historical appreciation of gold, a smaller and smaller amount of the metal brings more and more monetary value. For example, if we convert gold into known assets, then with one bar we can buy an extremely luxurious new car or almost a new luxurious apartment in major cities not only from us in the country, but also from the world.
The Devaluation Of Fiat Money And The Instability Of The Financial System
Gold is the best friend of people who want to save in times of currency fluctuations such as fiat inflation. However, inflation is the typical condition of all currencies in the world, as the amount in circulation is constantly increasing.
The example in the chart is for the US, but the devaluation of fiat money is seen all over the world – Europe, Russia, China, Japan, etc. And the downward trend in their purchasing power will not only not reverse.
These central bank policies are the cause of recurring cycles of economic growth and recessions, that is, for crises (grey areas in Chart 2). Thus, financial regulators not only fail to achieve the objective for which they were created – keeping currencies stable – they also fail in practice. They regularly affect the functioning of financial systems because money is not backed by anything, unlike in the past when gold acted as an anchor of monetary stability.
Unlike many other assets, the global supply of gold is limited, and its growth is associated with huge investments, so over the past five years, its production has been almost unchanged
Demand for gold is expected to increase as life returns to normal post-pandemic, and the macroeconomic environment, characterized by low or zero interest rates and high inflation, has historically supported the metal’s performance, according to a study by Oxford Economics .
Investment Gold Is VAT Exempt
Under European law, investment gold treated as bars or slabs with a purity of at least 995 or gold coins with a purity of more than 900 minted after 1800 are exempt from value added tax. The list of VAT-exempt currencies is updated annually.
At the same time, almost all other investment assets or trading in them are taxed. This is true even for interest income on deposits made in the banking system. The irony is that in the developed economies and in the Balkan Peninsula, interest rates on deposits have fallen to almost 0%.