Although gold stopped being a primary form of currency decades ago, it remains one of the most coveted assets for investors worldwide. Its role as a store of value, its liquidity, and its constant demand in industrial sectors make it an attractive alternative in times of economic uncertainty. However, like any investment, it also presents risks and limitations that should be carefully analyzed.

Main Advantages of Investing in Gold

  • High international liquidity. Physical gold can be converted into cash practically in any country, without border restrictions or acceptance barriers. Its universality makes it incomparable to other financial assets.

  • Long-term value preservation. Historically, gold has demonstrated a remarkable ability to maintain its value over time, acting as a shield against financial market volatility.

  • Hedge against inflation and devaluations. In inflationary environments, gold tends to appreciate. Since it is denominated in dollars, it also becomes more attractive when currencies like the euro weaken

  • Portfolio diversification. Because it usually moves inversely to stock and currency markets, gold helps reduce risks and balance exposure in an investment strategy.

  • Sustained demand in multiple sectors. In addition to its financial value, gold is an essential input in jewelry and the technology industry, which generates a structural level of demand that reinforces its long-term stability.

Disadvantages and risks associated with gold

  • It does not generate passive income. Unlike dividend stocks or bonds with coupons, gold yields returns if its price rises and the investor decides to sell.

  • Risk of speculative bubbles. During periods of crisis, demand for gold surges, but once the market corrects, prices can drop sharply.

  • Custody and security costs. Investing in physical gold involves additional expenses for storage and insurance to protect against theft or deterioration.

  • Taxes. Buying and selling gold must be declared and capital gains are taxable, although investment-grade bullion in the European Union is exempt from VAT.

  • Dependence on external factors. Its value tends to increase when the local currency is devalued or inflation intensifies, which means it does not always rise autonomously.

When is it convenient to invest in gold?

Gold typically shines in scenarios of rising inflation, currency devaluation, or geopolitical crises. The decline of stock markets or central bank announcements regarding monetary issuance usually signal a favorable environment for this asset. Conversely, when currencies are strong and inflation is contained, its appreciation potential is limited.

A passive buy & hold strategy tends to be most suitable for long-term investors. Since the economy is cyclical, acquiring gold during correction phases allows you to capitalize on future rises without getting caught in short-term speculative movements.

How to invest in gold in 2025?

Investors have multiple ways to gain exposure to gold, ranging from the most traditional to the most sophisticated:

  • Physical gold (bars or coins): offers direct control, but requires safe storage and insurance costs.

  • Shares of mining companies: their value depends both on the price of gold and on the profitability of mining operations.

  • Gold ETFs: exchange-traded funds that track the price of the metal and offer liquidity, transparency, and lower operating costs.

  • Futures contracts: derivative instruments that allow speculation on the evolution of gold prices, but come with higher financial risk.

Is investing in gold profitable

Profitability depends on the timing of the purchase, the investment horizon, and the type of exposure chosen. For those seeking to preserve capital against inflation, gold plays a key role. However, it should not be confused with an investment that generates recurring cash flows.

Cost analysis (storage, insurance, taxes) and the macroeconomic environment are decisive factors when determining its suitability within a portfolio strategy.

Alternatives to gold

Quienes no se sientan cómodos con la volatilidad del oro pueden optar por productos financieros de bajo riesgo como depósitos a plazo o cuentas remuneradas, que ofrecen rentabilidad fija, liquidez inmediata y cobertura por el Fondo de Garantía de Depósitos hasta 100.000 € por cliente y entidad.

Conclusion

Those who are uncomfortable with gold’s volatility may opt for low-risk financial products such as time deposits or interest-bearing accounts, which offer fixed returns, immediate liquidity, and coverage by the Deposit Guarantee Fund up to €100,000 per client and entity.

References

If you are interested in learning more about Investment Banking services and corporate finance consulting, we can help you. Contact us at info@avacum.com and we will answer all your questions related to venture capital. If you are an entrepreneur, you may also be interested in exploring other forms and sources of private financing for startups.

Páginas de interés: https://www.investing.com/ https://www.nyse.com/index | https://hbr.org/ | SEC | Harvard Business Review | Bloomberg.com | https://www.business.qld.gov.au/running-business/risk/identify-manage

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