Is Gold a Safe Investment?
Oct 14, 2020
Gold is a physical product subject to the fluctuations of supply and demand. Hence, the value of gold can change very quickly and a positive performance is not always guaranteed. Due to this, we are more likely to think that it is not a secure investment, which is true only if gold is the only investment. However, if gold is part of a larger investment portfolio, then the metal is secure and might have positive returns even during challenging times. When utilized smartly, gold can be a long-lasting and safe investment.
Gold’s primary use is jewelry which makes up 50% of the demand; meanwhile, another 40% is part of investments, and the last 10% are utilized in the industry. Interestingly, in terms of investments, gold and stocks are working separately; for instance, when the stock market is doing well, gold might be falling behind. The varying movement creates a diversified portfolio. That is why people buy stocks and bonds together as they have a negative correlation. For instance, bonds tend to go up when stocks go down; however, gold does not correlate with either one and by adding gold into the portfolio the chances of it supporting the investment when other assets are not performing well.
Some may think the solution would be to stock up with gold bars and jewelry. Instead, try to find more money-saving options, as many companies have markups just for the brand name. Investors normally invest into gold miners, the risk here is that most gold miners do not produce only gold. There are also other risks such as technical and operational issues that can reflect on the gold price.
To summarize our point gold can be a safe and risky asset. The aim is to do it wisely, as it is significant to invest in gold only partially, to diversify a portfolio with other assets. This way you will protect your investments and have support in case of any difficulties in the market.