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“The desire of gold is not for gold. It is for the means of freedom and benefit” ― Ralph Waldo Emerson
3 min read
“Making the first million is hard; making the next 100 million is easy” ― Theo Paphitis
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Gold has played a central role in the human story for centuries. The history of gold is as old as human civilization itself, intertwined with tales of wealth, power, and enduring beauty. Among the first to mine and craft gold into ornate jewelry were the Egyptians, whose creations remain legendary to this day. This precious metal also held cultural and religious significance in the ancient Indus Valley and Mesopotamia. Across the globe, the Incas and Aztecs revered gold as a divine substance, adorning their temples with intricate golden artifacts.
Read below to discover the stories and impact of this valuable resource. From its origins in ancient civilizations to its role in the modern global economy.
The Romans adopted gold as a symbol of power and wealth, as evidenced by their opulent treasures. In the Byzantine Empire, gold coins were the dominant currency in international trade, linking civilizations from the Far East to Europe. The Renaissance era saw gold leaf used lavishly in art, while exploration and conquest brought new deposits from the New World, leading to the ‘Golden Age’ of Spain.
In the 19th century, the California Gold Rush and other gold rushes around the world further increased the supply of gold. The United States established the Gold Standard in the late 19th century, linking the value of the dollar to a specific quantity of gold. This system prevailed for much of the 20th century until it was replaced by the Bretton Woods system after World War II.
In the modern era, gold retains its allure. It has transitioned from a symbol of wealth to a global reserve asset. Investors turn to gold as a hedge against economic uncertainties, reinforcing its timeless appeal as a safe haven investment. Gold is more than just a precious metal; it’s a symbol of human aspiration, resilience, and enduring value that transcends generations.
Gold differs from other investments, such as equities (stocks) and bonds, in several ways, making it a unique asset class with distinct characteristics:
Store of Value
Gold is often considered a store of value, especially during times of economic uncertainty and market turbulence. Its value tends to remain relatively stable over long periods, seemingly protecting against currency devaluation and inflation.
Non-Correlated Asset
Gold is considered a non-correlated or low-correlation asset. Its price movements often have minimal correlation with traditional financial assets, making it a valuable addition for portfolio diversification.
Lack of Income
Unlike equities, gold doesn’t generate income. Stocks may pay dividends, providing a regular income to investors. Gold’s value primarily relies on capital appreciation.
Tangible Asset
Gold is a tangible, physical asset. Investors can hold gold in various forms, including coins, bars, or jewelry. Equities represent ownership in a company but lack a tangible presence.
Limited Supply
Gold has a finite supply, and mining production can only increase the total supply gradually. This scarcity can contribute to its value, especially during times of high demand.
Global Currency
Gold is a universally recognised asset and is not tied to any specific country or currency. It can be bought and sold globally, making it a convenient investment option for international diversification.
Long History
Gold has been used as a form of money and a store of value for thousands of years. Its long history and universal appeal contribute to its status as a reliable asset.
It’s important to note that, like all investments, gold carries its own set of risks and may not be suitable for all investors. Gold’s price can be influenced by various factors, including supply and demand, central bank policies, and market sentiment. As with any investment, it’s essential to carefully consider their financial goals, risk tolerance, and investment time horizon when including gold in their portfolio.
The price of gold is influenced by various factors, including:
Supply and Demand: Changes in the supply and demand for physical gold can impact its price. Increased demand or decreased supply often drives prices higher.
Global Economic Conditions: Economic factors such as inflation, interest rates, and currency movements can influence gold prices. For example, when there are concerns about inflation, gold is often seen as a hedge against a devaluing currency.
Geopolitical Events: Political and geopolitical events, such as conflicts or economic sanctions, can create uncertainty in financial markets, leading investors to seek the safety of gold.
Investor Sentiment: Market sentiment, speculative trading, and the overall risk appetite of investors can affect gold prices.
Central Bank Policies: Decisions made by central banks, including changes in interest rates and monetary policy, can have a substantial impact on gold prices.
Equity Markets: Inverse relationships between gold and equity markets can lead to shifts in investment from one asset class to the other based on market conditions.
Jewellery and Industrial Demand: Gold is used not only for investment but also for jewelry and various industrial applications. Changes in these markets can influence prices.
Mining Production: The rate of gold mining production can also impact prices. Increases or decreases in production can affect the overall supply.
Exchange Rates: Since gold is priced in U.S. dollars, changes in exchange rates between the U.S. dollar and other currencies can influence gold prices for international buyers.
It’s important to note that gold prices are subject to fluctuations and can be influenced by a combination of these and other factors.
So, let’s take a look at historical gold prices per ounce between 1970 and 2023. Below, the chart you will see lists the price in CHF on the left, and in USD on the right. CHF is represented by the green line, whist USD is the darker line.
Nowadays, it is far more simple to invest in gold than it has been in the past. You only need a smartphone or computer with access to the internet!
You will likely have heard of ETFs (Exchange-Traded Funds) on your investment path, but are you aware of ETCs? ETCs are Exchange-Traded Commodities.
ETCs can offer traders and investors, without direct access to commodities markets, exposure to commodities such as metals (gold, silver etc), energy, and livestock. An ETC can track individual commodities, such as gold, or a basket of several commodities and can provide an interesting alternative to trading commodities. There are similairities and differences between ETCs and ETFs, and it is important not to confuse ETCs with a Commodities ETF.
ETCs typically focus on a single commodity, whereas ETFs tend to invest more broadly over a wide variety of securities or companies. However, both shares are listed and traded on exchanges, with prices fluctuating based on price changes of the ETC’s underlying commodity, such as gold. Unlike ETFs, ETCs are structured as notes, which are debt instruments underwritten by a bank for the issuer of the ETC, but which are backed by the commodities they track as collateral.
There is doubtless a long future ahead for gold, whether positive or negative only time will tell. Patterson Mills are here to ensure that your investment strategy aligns with your individual circumstances and objectives. Hence, should you wish to hold gold, your portfolio can certainly include this.
If you wish to go at it alone to include gold in your portfolio, have a look at Exchange-Traded Commodities in more detail and see if they are right for you.
Whichever route you go down, professional expertise in this area is vital. So, get in touch with us today and book your initial, no-cost and no-obligation meeting, you’ll be pleased that you did. Send us an e-mail to info@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.
Please note that all information within this article has been prepared for informational purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.
Patterson-Mills Sàrl is powered by Lawsons Network and operates as an Appointed Representative. We benefit from their regulatory infrastructure and cutting-edge software, enabling us to safeguard and enhance your wealth. Lawsons Network AG, Company No. CHE-394.490.386, Rue Neuve-du-Molard 19, 1204 Genève, Switzerland. Lawsons Network AG is registered as an Insurance Intermediary with the Swiss Financial Market Supervisory Authority (FINMA – 37795), a member of the Client Advisors register at Association Romande des Intermédiaires Financiers (ARIF – 32974) and affiliated to Organisme de Surveillance pour Intermédiares Financiers & Trustees (SO-FIT) as an SRO – Affiliate No. 1202.
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