People who have learned to only invest in stocks should take a closer look at how Germany manages its economy. In 1970, European countries suffered a massive inflation. While most countries had more than a 20% increase in their basic products and services, Germany was able to keep their inflation to single digits. The secret? The country’s gold reserves that were able to preserve Germany’s wealth for many years.
Keep gold investments no matter whatThe gold and stock market, as veteran investors know really well, are inversely correlated. This means that when gold prices are up, stocks are down and vice versa. While stocks have outperformed gold in recent years, it makes no sense whatsoever to remove gold investments from your portfolio. After all, people don’t invest in gold to gain a quick profit. Rather, people invest in the precious yellow metal in order to cover their assets in times of sudden events (inflation, bearish sentiments of investors, etc.) that would turn the market sour – a strategy that Germany has done for so many years. Gold’s value is ceaseless, which is why Germany decided to not sell its gold unless absolutely necessary. In the 90s, gold per ounce only costs around $380. Today, gold’s spot price fluctuates around $1,260 - $1,300. If Germany decides to liquidate some of their reserves, it would be able to support its countrymen for decades.
Germany’s gold amounting to 3,391.3 tons will be kept safely in the vaults of Bundesbank, The U.S. Fed, and London for many years. And speaking of keeping the country’s gold in vaults around the world, investors should also take cue from this. While keeping gold in personal vaults within your own country sounds patriotic, it actually makes greater sense if you keep a portion of them in multiple vaults abroad.
Storing gold outside your countryGermany’s gold reserves are stretched all over the world. Should another country invade Germany, the latter would be able to access their gold quickly. If the country’s gold reserves are all within Bundesbank, Germany would have a hard time shipping them out for liquidation. Private investors should do the same thing. If you’re an owner of physical gold, consider storing some from outside your country of origin. Investors don’t need to buy whole bars to get exposure to gold. There are ½ and ¼ oz. gold coins, and even online peer-to-peer services that allow investors to own a single gram of gold from a good delivery bar. Buying gold is cheaper and more efficient now thanks to the advancements of investing. Stocks will lose its value and currencies get devalued. However, gold has stood the test of time and remained a valuable asset especially in times of high inflation. Keep this in mind when you think about investing only in stocks.