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Is gold bullion a sensible long-term investment?

Gold has been a prized asset for thousands of years. Since the times of Ancient Egypt, it has been used as a symbol of wealth and status, and as a way to adorn our bodies and homes with something intrinsically valuable. In more recent times, gold is often considered a safe haven asset, hedging investors against the risks of inflation and volatility in the economy. But is investing in gold bullion a sensible long-term investment?


Let’s explore the factors that influence the value of gold, and assess why it may or may not be the right choice for investors looking to build wealth in the long term.

The value of gold

The innate beauty and way in which gold affects us as humans, almost emotionally, is definitely a testament to its value in a way that other objects aren’t. Whether it’s due to the ways our ancestors used it as a way to connect with the gods, or simply because of its lustrous qualities, there’s just something about this yellow metal. As such, gold’s status as a valuable asset has been consistently maintained throughout history.


During times of economic uncertainty and market volatility, gold often performs well as investors seek to stock up on safe assets to protect their wealth. This makes it an attractive option for anyone looking to diversify their portfolio, and experts recommend investing 5 – 10% for the best results. As part of a well-balanced portfolio, gold could be added in multiple forms such as stocks, contracts for differences (CFDs) or exchange-traded funds (ETFs) to help reduce overall risk and improve returns.

Hedge against inflation

One of the main attractions of having gold in your portfolio is its ability to hedge against inflation. Unlike paper currencies, which depreciate over time due to inflation, gold tends to retain its value. This is largely because it’s a limited resource, so we can’t just make more of it, making it constantly in demand worldwide.


However, investing in gold isn’t risk-free, even in times of recession or war. It’s also important to remember that physical gold doesn’t produce a yield when it is held, and there’s no guarantee that you will get more than you paid for it at the time you wish to sell. The price of gold, while consistent worldwide, can vary on a day-to-day basis. It’s influenced by a wide range of factors including supply and demand, geopolitical tensions and economic trends on multiple levels.


Long-term investors need to consider the potential for market volatility. As gold can be subject to significant fluctuations over short periods, think carefully about how the prospect of holding physical gold aligns with your long-term investment goals. Even though you may not understand every factor that affects the price of gold, researching current market trends can help you make the right decision about when to buy or sell gold bullion.

Consider storage

To date, some 208,874 tonnes of gold has been mined around the world. But unlike other investments, such as stock and bonds, gold bullion requires physical storage space. Most of the world’s gold is stored in banks and vaults, as it’s owned by nations or countries.


But for the individual investor, this can create additional, ongoing costs. You could decide to take on the responsibility of looking after your gold yourself, or entrust a dedicated service or professional to do so for you. Either way, you’ll need to pay for safe transport and security measures to protect your newly attained asset. Plus, whilst storage facilities may offer protection against theft or damage, you should also take out insurance to further safeguard your precious commodity. There are currently no limitations on the storage of precious metals at home in the UK, though, in times of war or global conflict, restrictions on the movement and holding of gold have previously been imposed throughout history.

Tax exemptions

In the UK, gains from investing in gold bullion are typically exempt from Capital Gains Tax (CGT). If you have a large amount of money to invest in gold, say £50k+, this could mean significant returns as you won’t have to pay any taxes on the profit of your gold when you sell it in years to come. For long-term investors, this is one of the most appealing aspects of investing in physical gold as you can maximise your return with minimal effort.


Ultimately, investing in gold bullion could be a sensible choice for investors seeking long-term stability, inflation protection and portfolio diversification – but it’s crucial to carefully weigh the pros and cons against your individual situation. By researching current and historical trends, understanding the factors that influence the value of gold and seeking professional advice, you can stack the potential benefits against the risks and make an informed decision about whether to invest in gold bullion.

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I'm Dom Farnell, a retail investor sharing my market experiences through blogs and articles. Though not a professional advisor, I aim to offer practical insights based on real-world experience, exploring strategies, challenges, and opportunities in investing.

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