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Why Are Global Central Banks And Costco Shoppers Buying So Much Gold As An Investment?

Why Are Global Central Banks And Costco Shoppers Buying So Much Gold As An Investment?

gold

Photo by Michael Steinberg

In an era of worldwide economic uncertainty, gold has emerged as a prized asset for investors seeking stability and long-term value preservation. From central banks to individual consumers, the allure of gold as a safe-haven investment has never been stronger.

Central banks, including China’s People’s Bank, are bolstering their gold reserves. This trend underscores a strategic shift away from traditional assets like U.S. debt and towards tangible stores of value. The rationale behind central banks’ gold accumulation is to hedge against the strong U.S. dollar, which has made imports more expensive for emerging economies like China, Business Insider reported.

“Accounting for almost a quarter of annual gold demand in both those years, many have attributed central banks’ ongoing voracious appetite for gold as a key driver of its recent performance in the face of seemingly challenging conditions: namely, higher yields and U.S. dollar strength,” the World Gold Council wrote in a recent report, pointing out that big gold buyers included China, Turkey, and India.

On the individual front, gold is gaining popularity among investors disillusioned with traditional investment avenues like real estate and stocks, The New York Times reported. The recent endorsement of gold by billionaire investor Ray Dalio decided to reallocate a significant portion of his portfolio to physical gold. In fact, he sold nearly $1 billion worth of stocks from his hedge fund Bridgewater Associates and converted them directly into physical gold, American Alternative Assets reported.

When asked in a recent interview about stocks, bitcoin, and gold Dalio answered, “If you put a gun to my head, and you said, ‘I can only have one, I would choose gold.”

Even retail giants like Costco are capitalizing on the gold frenzy, selling millions of dollars’ worth of gold bars and coins each month–and running out of stock. But Costco’s gold buyers are discovering that selling gold is not as straightforward as buying it. Gold bars, classified as collectibles, may not retain their value over time, and finding a buyer willing to pay the desired price can be challenging, The Wall Street Journal reported. Additionally, tax implications and transaction costs further complicate the selling process as Additionally, tax implications and transaction costs further complicate the selling process as the Internal Revenue Service considers gold bars collectibles and can tax up to 28% of any profits on gold held for more than one year, Business Insider reported.

Photo by Michael Steinberg: https://www.pexels.com/photo/gold-global-intergold-bullion-386318/