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Foreign exchange market

Alpari on Benefits of Investing in Gold Coins


 

In March 2016, Alpari gave all of its existing and potential clients a nice present by introducing a new service. From now on, you can buy gold coins from all over the world. Top be more specific, Alpari created a standalone company called Alpari Gold to let people buy gold coins from over 40 countries of the world.

 

Benefits of Investing in Gold Coins

This is what CEO of Alpari Gold Leonid Matveev, who has many years of expertise as Alpari’s leading investment expert, thinks on the matter:

 

For small-scale investors and plain folks out there, investing in gold coins is one of the most reliable and convenient investment solutions. Their value is definitely pegged to the price of gold since it is physical gold in the form of a coin. With that being said, their cost is very close to the spot market price of gold, and unlike gold bullions, gold coins are more liquid and are not subject to VAT. On top of that, a gold coin can make a great birthday present, which is going to be even more valuable over time.

 

Meanwhile, you can cash in at any time by selling your gold coins in a local bank. When buying gold coins, you can choose between multiple options of different size and price. That is why, even if you don’t have tons of money to invest in gold coins, you can still pick a nice one fitting your investment budget. And last but not the least, the quality of the gold coins you purchase via Alpari Gold is guaranteed by the mints that created them.

 

Gold has always been the world’s popular precious metal, with relatively high demand at all times. Among all financial markets out there, it is gold that is considered one of the very few safe-haven assets for the average investor along with some others. The thing is that gold has been a money standard for millennia. It can be a good way to save your capital from the devaluation of fiat money backed by nothing but empty promises while giving you an opportunity to get decent returns on your gold investments in a more distant future. Most of those savvy investors buy gold as a long-term investment since they know the true value of gold and the true worthlessness of fiat paper money. As for the ROI, over the last decade, gold has grown in value by a stunning 450%!

 


This holds true for gold bullions, coins, jewelry and pretty much any other thing made of gold. Another thing speaking in favor of gold investments is the fact that gold isn’t subject to corrosion and has a lot of other valuable features, which is why it is widely used in industrial and manufacturing production. Since gold belongs to rare metals, this is another reason why it can be seen as a decent long-term investment.

It is not accidental that all central banks around the globe have been buying gold for centuries in order to back their financial reserves. Even today, the central banks of Russia, China and many other countries are buying gold at an unprecedented pace. By the way, the economic and financial wellbeing of a certain country is determined by a number of major factors, including their gold reserves.

At Alpari Gold, you can already buy gold coins minted by St. Petersburg and Moscow Mints as well as the Royal Mint of Great Britain, Australia, Canada, South Africa, China, as well as the U.S. Mint.  

 

You can find the catalogue of gold coins and the pricelist by going to http://www.alpari.ru/ru/bullion-coins/

Expert Opinion on True Price of Gold Today

 

According to Alpari expert in gold Maxim Khanin, here are some benefits of investing in gold today:

First off, never in history have central banks been such fans of ultra-low or even negative interest rates. Even though the Fed already abandoned the idea and started implementing interest rate hikes, other major central banks of the world, including those from Japan, Eurozone, Switzerland, China, UK etc., continue their policies of fueling monetary and price inflation while turning from monetary regulators into institutions stimulating financial markets. That is why tons of bonds – some $6000 billion worth – saw their yields turn negative to make investors lose on such bond investments. That’s why those investors started withdrawing their funds from bonds and invest them in precious metals and other safe-haven assets with positive interest rates.

 

For instance, on March 10th, 2016, the ECB decided to make a cardinal step aimed at expanding the monetary stimuli by cutting the key interest rate form 0,05% all he way down to zero. At the same time, the deposit rates drop below zero all the way own to -0,4%. Meanwhile, the monthly asset purchase volume was expanded from 60 billion euros all the way up to 80 billion euros, which makes the money supply growth even bigger. That’s not good for the wellbeing of the common European currency. Gold reacted almost instantly by hitting the 13-month high against the U.S.

Dollar and the 5-month high against the Euro.

 

 

The expert says that the price of gold is indeed correlated with interest rates but slightly different from what one might think at first. For instance, let’s consider the Federal Reserve’s Federal Funds Rate. In theory, a tougher monetary policy implemented by a central bank leads to higher stock yields and triggers a flight of capital from gold. On top of that, in theory, higher Fed interest rates lead to a stronger dollar and weaker gold since gold and the U.S. Dollar has a negative correlation.

 

However, history shows us the reverse picture.  For instance, over the period of 1970 through 1980, the Fed rate goes from 4% all the way up to 20%. Over the same period of time, gold prices go from $35/oz all the way up to a stunning $675/oz.

 

Let’s consider another example – the pre-crisis period of 2003 through 2006. The Federal Funds Rate goes from 1% up to 5.5%. Gold prices nearly double up by advancing from $355/oz to $650/oz.

 

It is not about the Fed rate hikes triggering a gold rally. This is not the case. Instead, the Fed rate hikes curb gold prices. Still, keep in mind that in both examples, the Fed’s monetary toughening (interest rate hikes) followed inflation. The thing is, the negative real U.S. interest rate (the Fed Funds Rate minus the consumer price index) almost always triggered a new gold rally hitting a new price high.

 

With that being said, there is nothing to be surprised about the fact that the interest rate cuts occurring worldwide keep on pushing precious metal prices higher. Taking into account the fact that the Fed has been operating the Philips curve while trying to stimulate inflation, we get a factor capable of sustaining the gold price growth for months (if not years) to come.

 

 

The bottom line is, the higher gold prices go, the more stable gold is going to be thanks to the exponential nature of demand growth. As stock indices are crashing, negative deposit rates are being introduced, economies are slowing down, geopolitical tensions are escalating, more and more investors start fleeing many of those financial markets for safe-haven assets like gold.

 

Today, new gold buyers are joining the central banks that have been heavily buying gold over the last 8 years. Given the opposite vectors of supply and demand seen in 2015 (gold production dropped by 4% while gold demand increased by 4%) as well as the fact that the international markets of gold and silver are small relative to other financial markets out there, we may well see another deficit in the gold market. With that being said, the more of those new gold buyers join in, the higher the prices may go. The situation is going to escalate even more when there is a huge gap between paper gold and physical gold.

 

There are even reasons to expect a technical default. Not so long ago, as the result of an unexpected major withdrawal on COMEX, the world’s biggest precious metal exchange, the supply of physical gold available for immediate delivery crashed by a stunning 73% at a time! With that being said, as of late January 2016, 99,81% of gold futures traded out there found themselves no longer backed by physical gold. 

 

 

While the gold rally in the Western currency zone is just starting out, the same rally in the Russian Ruble zone has been underway for years.  Over the last 2 years, gold and silver have been nice safe-haven assets for Russian retail investors and plain folks. The RUB-denominated gold prices nearly doubled up over the period of early 2014 through early 2016. Silver prices gained 57% over the same period.

As for gold coins, their investment results are even more stunning. For instance, the output price of the most popular Russian gold coin has gained 126% over the last 2 years.

 

 

Under today’s uncertainty and instability dominating financial markets, it's a good idea to invest in physical gold. That’s for sure!

 

 

You are free to discuss this article here:   forum for traders and investors

 

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