From ancient times, gold has always held a special value. Gold as an asset retains unique intrinsic qualities for investors. What are the reasons to buy gold, aside from its inherent beauty? Is gold still lucrative or safe as it once was?
Why Buy Gold?
Gold is certainly not new, and it has played a significant role in world economies as a unit of currency. Although paper currency has taken its place, gold is still reliable as a long-term investment that holds a valid place in an investor's portfolio. This is most particularly true during times of economic uncertainty.
Gold Hold Its Value
Unlike many other assets, gold maintains its value, even throughout the ages. Gold can be passed on to preserve wealth from one generation to the next. Although the US dollar is an important world reserve currency, when the value of the dollar falls, this prompts investors to seek the security of gold. This raises gold prices. Gold historically hedges inflation because the price rises with the cost of living. Over the last 50 years, gold prices soared when the stock market plunged during high-inflation times. Gold retains its value in times of financial uncertainty and in times of political uncertainty. The "crisis commodity" sees investors flee to the investment safety of gold. During uncertain times, gold often outperforms other investments. Many experts suggest that the recent uncertainty makes gold a secure investment to ride out the pandemic.
The key to the diversification of an investment portfolio is finding investments that are not closely correlated. That is that some investments tend to go up when others go down. This balance creates a solid foundation. Gold historically negatively correlates with stocks and other financial instruments (Gold goes up when the stock market goes down.) Well-diversified investors combine stocks and bonds with gold to reduce overall volatility and risk.
The Bottom Line
Gold is a critical part of a well-diversified portfolio because the price increases as a response to events that create a decline in the value of other investments, like stocks and bonds. The price of gold can be somewhat volatile in the short-term, but it always maintains its value in the long-term. Throughout the years, gold has served as a healthy hedge against inflation, so it is an investment worth considering. To purchase gold as an investment, Contact Us for more information.