Used to store value and as currency for thousands of years, gold has consistently provided long-term returns for investors looking to protect their wealth. In recent years, many have seen gold’s potential as a universal currency in an era where the US dollar is losing its purchasing power rapidly.
Since January 2020, gold is up more than 60% against the US dollar, rising from $1,519 to just over $2,500 per ounce today. In this time, huge numbers of investors bought precious metals for the first time, with many also choosing to store it in their own safe deposit box at Merrion Gold’s sister company, Merrion Vaults.
One of gold’s main strengths is its power as a diversifier. The gold price is counter-cyclical, meaning the price tends to rise during times of uncertainty when the prices of most risk assets like shares and bonds are prone to falling. Amid growing geopolitical uncertainty, particularly surrounding Russia, the ongoing situation in the Middle East, and the threat posed by China to Taiwan, a holding in precious metals can provide protection for an investment portfolio.
Sitting outside the global banking system, holding gold does not come with any counterparty risk. Unlike holding funds in a bank account, where any funds more than €100,000 are not covered by the Deposit Guarantee Scheme, holding gold in your own safe deposit box or at a secure warehouse means that an investor’s holdings are not on the balance sheet of a credit institution.
Unlike fiat currencies, which can be printed easily by central banks, the mining of gold and production of bars is a difficult process. This lends to gold’s scarcity value, meaning that it will always hold its value against the likes of the euro or the US dollar. The growing demand for gold jewellery, particularly in Asia, buoys the gold price when the global economy is performing well. Outside of jewellery and private investors, there is strong demand for the yellow metal from central banks. In the 10 years to December 2023, the central banks of both Russia and China more than doubled their gold reserves – adding more than 1,100 tonnes of gold each over that decade.
Due to gold’s global appeal, investors can take advantage of the market’s liquidity to buy or sell freely and quickly. With more than $160bn of gold traded globally every day, it is easy for investors to enter and exit the market at a time that suits them. Merrion Gold offers customers the chance to store precious metals in safe deposit boxes or at global financial centres such as London and Zurich.
