Reasons why you should invest in Gold?
Jul 08, 2020
Gold is without a doubt one of the main alternatives for liquid investments. It offers financial security and acts as a safe haven during economic crisis. Nowadays, gold can be purchased in various forms such as coins, bullion, jewelry and exchange-traded funds, to name a few. While Gold is getting more and more associated with fashion and jewelry, why do people, tend to also invest in gold?
For a thousand years, people have continued to invest in gold for various reasons. It is a precious metal that we run to when other forms of currency don’t work, which means it always has some value as insurance against tough times. Below are some of the reasons why you should invest in gold:
- Hedge against inflation. Gold rises in value when inflation takes hold. Since gold is priced in U.S. dollars, any deterioration in the dollar will logically lead to a higher price of gold. As a result, during inflationary times, gold offers a much more stable investment than cash.
- Provides liquidity. Investments in gold can be liquidated easier than other physical assets like real estate. Unlike other assets there is no lock-in period in gold investments except for sovereign gold bonds
- Holds its value. Gold tends to maintain its value over time. Economists argue that even the price of gold is not indicative of its value. That is, even if the price decreases, the underlying value of gold doesn’t change much. This is often largely because there’s a hard and fast quantity of gold thanks to the very fact that it’s a commodity, whereas the U.S. dollar, which may be a sort of fiat currency, holds no inherent value.
- Diversification. Adding different securities to your portfolio is an essential way to diversify and lower the overall risk of your investments. Moreover, because gold often moves inversely to the stock market and currency values, it provides an especially effective way to diversify.
Gold should be part of a diversified investment portfolio, as its price increases when the price of financial instruments such as stocks and bonds fall. Despite the fact that the price of gold can be volatile in the short term, it has proven to maintain its value in the long run. Through the years, it has served as a hedge against inflation and the erosion of major currencies; therefore Gold is definitely one of the investments that we need to consider.