Between 2000 and 2021, the price of an ounce of gold rose from €310 to €1,600, an increase of 430% over more than 20 years. Global economies, battered by various crises or by monetary policies, have weakened the stock markets and have repeatedly prompted investors to abandon stocks and/or bonds in favor of gold as a long-term investment.
However, can we trust yellow metal to invest? Does it offer safe and effective protection in a wealth management strategy? Some answers in this article are thanks to a retrospective analysis of the price of gold over the past 20 years.
1999–2004: gold victim of the internet bubble
From the end of the 90s until the beginning of the 2000s, investors abandoned the precious metal to turn to technological stocks resulting from the internet bubble. The price fluctuates between €280 and €320 per ounce.
2005 – 2012: Gold outperforms in response to financial crises
Once the internet euphoria subsided, gold began an uninterrupted rise until 2012, a veritable seven-year rally at the end of which it peaked at €1,373 an ounce. The world is indeed going through an unprecedented crisis, the Subprimes (2008). This global systemic financial crisis led to an increase in public debt from 2011.
During this period when countries were plunged into a deflationary (or recessionary) economic situation, gold continued to outperform. The ounce was worth less than €550 in August 2008 and climbed to €780 six months later, while the world stock exchange unscrew.
Investors fearing that their financial investments will be contaminated by the recycling of subprime mortgages, hasten to sell them in favor of real assets such as gold, which they consider as a protective value of their heritage.
2013 – 2018: the price undergoes a correction and pauses
The price underwent a correction in 2013 of approximately 30%; then it fluctuates between €900 and €1,200 until the 3rd quarter of 2018.
2019 – 2021: historic record
The price is attacking a new spectacular rise which has earned it its record, at €1,744 per ounce in August 2020 due to the uncertainties caused by the health crisis. Despite an expected correction after this record, the price remains stable throughout 2021. This stagnation is the result of the rebound in the financial markets and the negative impact linked to the anticipation of the rise in US interest rates.
Gold: a reliable asset to protect your assets from inflation
Past and recent events demonstrate that an allocation to gold in a diversified portfolio is one of the safest investments against the risk of capital loss. The fact that it is decor-related from other financial products allows you to smooth out the losses incurred on other assets and reduce the risk during periods of uncertain conflict, stock market crashes, etc.
A liquid asset redeemable internationally
Gold remains a tangible asset that stands out from other investments because of its international liquidity. It has the advantage of being still considered a strategic currency, in particular, because of its use by central banks and its absence of issuer risk in its physical form. Gold coins, bullion, and fractional bullion are sold or traded internationally; also, if you need money, you can resell your gold coins or bars easily almost anywhere in the world.
A stable asset that appreciates over the long term
Investing in physical gold cannot be considered for purely speculative purposes as it generally produces no return while it is held. On the contrary, its performance is acquired over time.
No taxation for gold investment on the purchase
Taxation on physical gold (coins and ingots) only applies to resale, except for coins minted before 1800. Indeed, unlike bullion coins (minted after 1800), they are considered collector’s items and are subject to 20% VAT at the time of purchase.
During the sale, two tax possibilities apply depending on your case.
Capital gain tax
• Condition: obligatory presentation of a nominative invoice that indicates the price and the date of acquisition of the gold.
• A tax of 36.2% on the net capital gain after the sale.
• Reduction: 5% per year from the third year of full ownership, total after 22 years.
Flat rate tax on precious metals
• This taxation on the entire amount of the transaction applies when it is impossible to justify the purchase: this is sometimes the case when gold is transmitted from generation to generation.
• A flat rate of 11.5% (including 0.5% CRDS) is levied on the amount of the sale, with or without capital gain.
Gold, a reliable haven in a diversified portfolio
Gold is a benchmark vehicle for protecting assets in times of crisis or the event of loss of confidence in institutions. Its protective role is part of a strategy to strengthen wealth within a diversified portfolio.
Gold has proven over the years that it is a reliable and sustainable investment over the long term.