How to invest in gold in 2025: A comprehensive guide
- admin474127
- Jan 31
- 16 min read
Are you wondering if the current gold price is too high to invest now?
As global markets struggle with uncertainties, gold is once again becoming the focal point of attention as a safe investment.
The precious metal has always played a special role, whether as a symbol of wealth or as a reliable store of value. However, in recent years, the gold market has noticeably changed. These changes are attributed to a number of factors, including global political upheaval, ongoing fears of inflation, rising living costs, social inequalities, and government debt.
Given these uncertainties, many investors are seeking stable investment opportunities, and gold stands out as an especially reliable option.
In 2024, the gold price reached new highs, reflecting the uncertainties in the global financial markets and growing concerns about currency stability.
But what does this mean for you as an investor? Is the price of gold now too high to enter, or does it still offer opportunities for long-term wealth building?
In this guide, we will take a closer look at the current state of the gold market, historical developments, and the key factors influencing the gold price. This will help you make an informed decision about whether and when investing in gold makes sense for you.
Gold: The Difference Between Price and Value
To properly assess gold as an investment, it is crucial to understand the difference between its price and its value. One ounce of gold, which is 31.1 grams, retains its intrinsic value regardless of external factors. This physical unit has always held special significance as a medium of exchange, a store of value, and a safe investment due to its consistent chemical and physical properties.
The price of gold, however, is variable and reflects the purchasing power of the currency in which it is quoted. These price fluctuations can be influenced by various factors such as economic uncertainties, expectations of inflation, supply and demand, and geopolitical developments. While the intrinsic value of gold remains constant, its price is heavily shaped by economic conditions and market perceptions.
For investors, it is therefore of great importance to recognize this distinction. The gold price may fluctuate, but the actual value of the gold remains stable.
This understanding is key to making smart and long-term successful investment decisions. When you invest in gold during times of high inflation or a weak currency, the price may be higher, but the value of the ounce remains unchanged. This insight helps you grasp the true nature of your investment and strategically respond to economic changes.
The graphic compares the value of an ounce of gold in 1971 with the value of an ounce of gold in 2024, highlighting how gold has maintained its purchasing power since 1971. In 1971, when the gold standard ended, the price of an ounce of gold was $35 – roughly the amount one would pay for a high-quality suit. Today, in 2024, the price of gold is around $2,700, which is similar to the price of a custom-made suit, which you can buy for anywhere between $1,000 and $2,500 depending on quality. This illustrates that, unlike the US dollar, gold has preserved its purchasing power.
The influence of gold on your portfolio: Insights from research on diversification
Diversification is a fundamental principle in investing. Essentially, it means spreading your money across different asset classes to minimize risk. The goal is to avoid being dependent on the performance of a single investment. For example, if you invest everything in real estate and the value of your property suddenly drops due to various external factors, a significant portion of your wealth is affected. With diversification, however, you ensure that losses in one area can be offset by gains in others.
An illustrative example: Instead of solely investing in real estate, you could diversify your capital by also investing in various precious metals, technology metals, and rare earth elements. These commodities not only offer additional diversification but also have the advantage of being continually consumed. There are many other worthwhile investment options that follow a similar principle: they exhibit what’s known as a negative correlation, meaning their performance tends to move in opposite directions. Moreover, they have independent cycles, which can further stabilize your portfolio.
Should there be fluctuations in one of these markets, the rest of your portfolio remains stable. This way, you protect your wealth from sudden market shifts and increase your chances of consistent returns in the long run.
Gold is particularly interesting in this context because it often has a low or even negative correlation to stock markets. This means that gold frequently rises in value when stocks fall – making it a crucial component of a well-diversified portfolio.
The gold standard and currency stability
Historically, gold has been a fundamental cornerstone for the stability of currencies. During the era of the gold standard monetary system, a country's money supply was directly tied to the amount of available gold.
This meant that governments could only print as much money as was backed by gold reserves, which contributed to the stability of the currency’s value. The gold standard era began in the late 19th century and lasted until World War I. During this period, the gold standard helped maintain the value of currencies because it provided a solid foundation.
The direct link between the value of money and gold reserves created trust and provided a certain degree of stability in currency systems. Unlike modern currencies, which are often influenced by economic and political factors, the gold standard offered a fixed basis that ensured the value of money.
However, World War I and the subsequent Great Depression led to significant economic pressures that marked the end of the gold standard. As a result, many countries turned to more flexible monetary systems that were no longer tied to gold, leading to a different form of currency management.
Once the gold standard was abandoned, it paved the way for more flexible currency systems, but these systems also became more susceptible to inflation and other economic fluctuations. This historical perspective highlights the strong connection between gold and currency stability, providing valuable insights into the role gold has played in economic security (Eichgreen, 1992).
Gold as a hedge against inflation
Gold has proven to be a reliable hedge against inflation over centuries, particularly during times of economic uncertainty.
A significant study by Dirk G. Baur and Brian M. Lucey, published in the Financial Review in 2010, analyzes the role of gold in the context of stocks, bonds, and market risks, offering impressive insights on the subject.
Particularly during the global financial crisis of 2008, gold acted as an anchor of stability, as it lost value less dramatically than many other asset classes or even appreciated in value. The study by Baur and Lucey underscores that gold provides protection against inflation risks over the long term, although the effectiveness of this protection can vary depending on the market situation.
Gold pricing
The pricing of gold is a dynamic process influenced by a variety of factors. In addition to supply and demand, numerous economic and geopolitical conditions play a crucial role. Understanding the factors that determine the gold price is important for making informed investment decisions.
Key factors that influence the price of gold include:
Central Bank Policies: The decisions made by central banks regarding interest rates and currency reserves can significantly impact the gold price. Particularly during low-interest periods, gold becomes a more attractive investment, as it is not dependent on interest rates and instead compensates for the loss of purchasing power through an increasing price.
Inflation Expectations: During times of high inflation, investors tend to buy gold to protect their purchasing power. This increases demand, thereby driving up the price.
Industrial Demand: Gold not only plays a role as an investment but also has wide applications in jewelry manufacturing and the electronics industry. Fluctuations in industrial demand directly impact the gold price. A prime example of this is India, where demand for gold traditionally spikes during wedding seasons, affecting the price.
Speculation: Market participants who bet on short-term price fluctuations can cause significant price movements through their trading activities.
Global Economic Growth: Periods of strong economic growth can reduce interest in gold, as investors seek more attractive returns in other asset classes. In contrast, during economically weak times, interest in gold as a safe-haven asset increases.
Technological Innovations: Advances in gold extraction or recycling technologies can increase the supply, which could lead to a decrease in the price.
Central Bank Gold Reserves: Changes in the gold reserves of central banks – whether through purchases or sales – can have substantial impacts on both the supply and price of gold.
These factors often interact, and together they can lead to significant fluctuations in the price of gold, depending on the prevailing economic and political circumstances.
Historical price development
Since the end of the Bretton Woods system in 1971, the price of gold has risen considerably. For example, an ounce of gold cost around 35 US dollars in 1971 and is now around 2,700 US dollars. This corresponds to a 77-fold increase (World Gold Council).
Gold as a crisis indicator: How the end of the Bretton Woods system shaped the global economy
The Bretton Woods Agreement of 1944 was designed to bring stability to the global economy after World War II. At its core was the linkage of the US dollar to gold—an ounce of gold was set at $35. The idea behind this system was that the amount of money in circulation had to be backed by the amount of gold held in national reserves. This system ensured trust in the currency and prevented excessive money printing (Eichengreen, 2011).
However, in 1971, this system was upended. President Richard Nixon announced that the US dollar would no longer be tied to gold—the famous "Nixon Shock." This decision meant that the United States, and ultimately the rest of the world, could print money freely without being reliant on gold reserves. What followed was a period of economic uncertainty: national debt increased, and the purchasing power of money decreased (Nixon, 1971). The 1970s saw a period of high inflation combined with stagnating growth, known as stagflation. During this time, many realized that gold could serve as a hedge against currency devaluation and inflation (Friedman & Schwartz, 1963).
The end of the gold standard allowed governments to respond more flexibly to economic challenges. However, it came at a cost: the ability to print unlimited money led to an increase in the money supply, which ultimately diluted the value of currencies. Gold, on the other hand, maintained its value, which is why it became increasingly seen as a safe haven during times of crisis (Helleiner, 2014).
The "Nixon Shock" was not only an economic turning point but also made gold a crucial indicator of crises and a preferred safeguard for investors looking to protect themselves from the devaluation of paper currencies.
Current gold prices and the economic situation: a look at the most important trends
In the current economic landscape, gold has a central role as an asset class and security reserve. The economic uncertainties of recent years, including the global pandemic, geopolitical tensions and persistent inflation, have increased the demand for gold as a safe haven.
Gold price at record high: the economic reasons behind the rise
In the spring of 2024, the price of gold experienced a significant surge that caught the attention of many investors. By December 2023, the price for one fine ounce of gold had reached $2,050 and €1,900, marking a substantial increase of around 30% compared to prices in 2020 (London Bullion Market Association, 2023). However, from February 2024 onwards, the price climbed even higher, reaching notable figures of $2,470 and €2,267 per ounce by the spring.
This rapid rise can be attributed to a combination of global uncertainties and economic challenges. Factors such as ongoing geopolitical tensions, rising inflation rates, and growing distrust in some major currencies have driven many investors to turn to gold as a safe haven. Particularly during times when currencies lose purchasing power—such as due to the expansive monetary policies of central banks—gold offers stability. Historically, the gold price has been sensitive to such uncertainties, as it is often seen as a hedge against market volatility and inflation (World Gold Council, 2023).
Looking back, the exceptional development of the gold price becomes evident: In 2017, the price was at a low point, around $1,150 and €1,150. Since then, it has more than doubled, with the most significant increase occurring in the past few months. Particularly from February 2024, when the price surged dramatically, the gold market was reaffirmed as a safe haven for investors.
This comparison shows that gold continues to be seen as a reliable safeguard in times of economic uncertainty, especially in the face of rising inflation and geopolitical challenges.
Gold and inflation: How the precious metal acts as a protective shield against loss of purchasing power
Gold has proven to be a reliable hedge against inflation over many years. According to the U.S. Bureau of Labor Statistics, the official inflation rate in the United States in 2023 was around 4.0% (U.S. Bureau of Labor Statistics, 2023). These figures are based on the so-called "basket" of goods used by government agencies to calculate average price changes. However, this basket often does not reflect the actual burden many people experience in their daily lives—especially with sharply rising costs for energy and rent.
Since not everyone is affected by the same price increases, gold provides a better way to measure real loss of purchasing power. Unlike the basket, which can vary individually, gold remains a stable benchmark. When you look at the price of gold over longer periods, you can clearly see how much the currency has lost value. Since the end of the gold standard in 1971, the price of gold has risen significantly, reflecting the depreciation of currencies such as the U.S. dollar. Gold retains its value—it is the currency that becomes weaker in relation to gold.
Studies by Baur & Lucey (2010) show that, during times of high inflation, gold can yield a return of 1-2% above the inflation rate. While official inflation measures through the "basket" of goods only provide a limited view of actual price developments—and statistical adjustments often obscure the true inflation—long-term trends in the price of gold offer a much more realistic picture of purchasing power loss. In fact, the price of gold doesn’t actually rise; rather, due to the diminishing purchasing power of your currency, you need more money to acquire the same amount of gold.
How trade conflicts and geopolitical uncertainties influence the price of gold
Geopolitical tensions and economic uncertainties have driven the price of gold significantly higher in recent years. Particularly, trade conflicts between the U.S. and China, as well as the conflict in Ukraine, have unsettled financial markets, leading many investors to increasingly turn to gold as a means of protecting their wealth (World Gold Council, 2023).
In addition, political developments have reinforced this trend. Some countries have reintroduced the gold standard to stabilize their currencies. At the same time, an increasing number of BRICS countries are refusing to accept the U.S. dollar as a means of payment and are instead demanding gold. This adds further uncertainty to the international markets and increases the demand for gold as a safe alternative.
In times when currencies lose value and global markets are uncertain, gold remains one of the few constants. For many investors, it is the reliable choice to minimize risks and secure their portfolio during turbulent times.
Gold production in decline: How supply bottlenecks affect prices
Global gold production has significantly declined in recent years. Depleted deposits and rising production costs are making it increasingly difficult to economically extract new gold reserves. In 2022, global production stood at about 3,000 tons, showing a slight decrease compared to the previous year (US Geological Survey, 2023). These supply shortages have further pressured the price of gold.
The scarcer the available gold, the higher the prices tend to rise—especially because demand for the precious metal remains strong. Investors are looking for safe-haven assets during times of economic uncertainty, and gold provides exactly that.
Overall, gold remains a sought-after asset class that gains even more significance in times of inflation and economic instability. The limited availability contributes to the potential for further price increases, and for many, it remains a reliable tool for diversification and protection against economic risks.
Tips for investing in gold
1. long-term perspective
If you invest in gold, you should take a long-term approach. Gold is not a promise of quick profits, but serves primarily to protect your assets against loss of purchasing power and inflation. For investors looking for stability, gold offers a solid hedge.
2. Diversification
Diversification is a key strategy to minimize risks in your portfolio. By investing a portion of your portfolio in gold, you can hedge against economic uncertainties. Gold often has a negative correlation to stocks and other investments—when these markets fall, gold tends to remain stable or even increase in value.
By spreading your investments across various asset classes, you protect yourself from fluctuations in volatile markets. Even if part of your portfolio experiences losses, gold can offset those losses and provide long-term stability.
3. Physical gold vs. ETFs
When deciding whether to invest in physical gold (coins, bars) or exchange-traded funds (ETFs), many investors wonder which option is the better choice. We strongly advocate for physical gold, as ETFs ultimately represent a claim without sufficient backing by real gold. The low coverage ratio makes actual delivery in case of need virtually impossible.
Physical gold offers the undeniable security of a tangible asset, independent of fluctuations in financial markets. It is a real, material possession that is globally accepted as currency and can be exchanged for any currency at any time. This direct control and availability make physical gold a stable investment tool, especially during times of economic uncertainty.
Gold ETFs may seem to mirror the gold price and be liquid and flexible, but the actual physical gold behind these certificates is often minimal. Investors essentially acquire a claim paper that, in case of emergency, does not guarantee access to real gold. Furthermore, there is a risk that trading in ETFs could be suspended under certain market conditions.
In contrast, physical gold stored in a customs-free warehouse is always tradable—whether online or directly. There is no possibility of trading being suspended because all the gold sold is 100% physically present and immediately available.
From our perspective, only physical gold carries the security of a real and readily accessible value. Unlike ETFs, which are primarily a financial product, physical gold offers the advantage of possessing a tangible and universally recognized asset that remains stable even in times of crisis. Therefore, we see physical gold as the reliable and secure form of investment.
4. Regular investments
In addition to lump-sum investments, it makes sense to invest regular savings instead of putting a large sum in at once. This helps to cushion market fluctuations. This approach, known as the dollar-cost averaging (DCA) effect, reduces risk by purchasing both at higher and lower prices, which lowers your average cost.
A combination of lump-sum and regular investments gives you more flexibility: You can immediately respond to favorable market opportunities while ensuring that you are making stable, long-term investments. This strategy allows you to take advantage of short-term opportunities while staying well-positioned for the long run.
5. Storage
The secure storage of physical gold plays a crucial role in protecting your wealth. While traditional methods like bank safe deposit boxes are considered safe, they should be approached with caution. In certain cases, such as government orders, a safe deposit box can be opened without your knowledge. The planned asset register could further facilitate this access, especially if there is suspicion that valuable items like gold are stored inside.
Historical events, such as government-imposed gold bans, show that the ownership of gold can be restricted under exceptional circumstances. This highlights that there is no absolute ownership right to gold in Germany, even if it is stored privately at home. In the past, owners were sometimes forced to surrender their gold to the state, often without the security of adequate compensation. To protect yourself from the risks of such a "gold ban," storing gold in a customs-free warehouse outside the EU offers a significant advantage. There, not only is the gold securely stored, but it is also possible to exchange gold for other precious metals in case of an emergency.
Furthermore, bank safe deposit boxes do not offer legal security through insurance or deposit protection. There is generally no legal entitlement to compensation, as it is legally regulated. In case of an emergency, the holder remains unprotected.
For truly secure storage of precious metals, we recommend customs-free warehouses, ideally outside the European Union. These storage facilities not only provide protection from government access but also offer tax advantages. For example, VAT is waived when storing white metals like silver, platinum, or palladium, which would otherwise be applicable when stored domestically.
A solid storage strategy is essential to protect the long-term value of your gold. Therefore, we advise carefully examining the risks of bank safe deposit boxes and opting for customs-free warehouses to ensure maximum security and flexibility.
6. Tax aspects
Consider the tax advantages of gold investments. In many countries, profits from the sale of physical gold are tax-free after a holding period of one year. Research the specific tax regulations in your country to get the most out of your investment.
7. Market analysis
Monitor global economic developments and their impact on the gold price. Geopolitical uncertainties, inflation expectations and central bank interest rate policies are important factors that can influence the price of gold. A well-founded market analysis will help you find the right time to buy or sell gold.
8. Emergency reserves
Gold is ideal for your emergency reserves. While cash can quickly lose purchasing power during crises or currency devaluations, gold has maintained its value over the years. It provides you with the security of owning a stable asset in uncertain times.
Since gold is a finite resource, it remains stable regardless of political decisions or economic turbulence. In economic crises, gold has consistently proven itself as a reliable store of value and medium of exchange. By holding gold as part of your emergency reserves, you can be confident that you will have a steady value available, even in challenging times.
Conclusion and recommendation
Conclusion:
Gold remains one of the safest investment options in 2024, especially in uncertain economic times. Despite the rise in gold prices, it continues to provide reliable protection against inflation and loss of purchasing power. As part of a well-diversified portfolio, gold plays an important role, as it often acts independently of other markets. In times of crisis, when currencies fluctuate and markets are unstable, gold consistently proves to be a safe haven.
Recommendation:
If you want to secure your wealth in the long term, it makes sense to invest a portion in physical gold. Combine larger lump-sum investments with a regular savings plan to benefit from both strategies. Ensure that your gold is stored securely – ideally not in a bank safe, but in a customs-free warehouse, to protect your investment as best as possible. Take advantage of tax benefits and keep an eye on economic developments to make the most of your gold investment.
Scientific sources and further reading
Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45(2), 217-229.
Baur, D. G., & McDermott, T. K. (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34(8), 1886-1898.
Eichengreen, B. (2011). Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. Oxford University Press.
Friedman, M., & Schwartz, A. J. (1963). A Monetary History of the United States, 1867-1960. Princeton University Press. https://press.princeton.edu/books/paperback/9780691003542/a-monetary-history-of-the-united-states-1867-1960
Helleiner, E. (2014). The Status Quo Crisis: Global Financial Governance After the 2008 Meltdown. Oxford University Press. https://global.oup.com/academic/product/the-status-quo-crisis-9780199973651?cc=us&lang=en&
Hillier, D., Draper, P., & Faff, R. (2006). Do precious metals shine? An investment perspective. Financial Analysts Journal, 62(2), 98-106.
Jastram, R. W., & Leyland, R. (2009). The Golden Constant: The English and American Experience 1560-2007.Edward Elgar Publishing.
London Bullion Market Association. (2023). Gold Price Data.
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
Nixon, R. (1971). Address to the Nation on Economic Policy: "The Challenge of Peace". The American Presidency Project. https://www.presidency.ucsb.edu/documents/address-the-nation-outlining-new-economic-policy-the-challenge-peace
Swiss National Bank. (2023). Gold Prices in Swiss Francs.
U.S. Bureau of Labor Statistics. (2023). Consumer Price Index Summary.
US Geological Survey. (2023). Mineral Commodity Summaries: Gold.
World Gold Council. (2023). Gold Demand Trends.
World Gold Council. (2023). Historical Gold Prices.
European Central Bank. (2023). Gold Prices in Euro.
