17 Reasons to Invest in Gold
Have you ever thought about why gold investments are considered to be so safe and valuable?
The unique investment qualities of gold make it a perfect diversifier for your investment portfolio. Gold belongs to a distinct asset class and acts as a core risk management tool for those who want to achieve financial stability.
The precious metal can be seen asa strategic, long-term, and risk-free investment option. Gold was used as “money” in the last 2,000 years, and in some ways, little has changed. It appreciates more than stocks, real estate, bonds, paper currency, and all other sources of wealth.
The price of the gold is determined by demand and supply. But as supply will remain constrained as it has been for a long time, and demand constantly rises over time, there’s nothing to worry about. In this blog, we’ve come up with seventeen unparalleled upsides of investing in gold.
1. A Hedge Against Inflation
Gold prices rise as the cost of living increases. For decades, investors have observed soaring gold rates during inflation periods. As the stock market plunges into high-inflation, gold rises above.
With paper and digital currencies on the rise, there’s no limit to the number of dollars that’ll be created in the near future, which increases the chances of uncontrollable inflation. And hence, there’s no limit to the eventual value and price of gold.
2. Protection Against Deflation
The world hadn’t seen a deflation since the great depression of the 1930s and 2008’s financial crisis. The pandemic, however, has slowed down the economy, and businesses have come to a halt. In such a scenario, people hoard cash for future use, and the best way to hoard wealth is in the form of gold.
3. Measure of Wealth
Gold is an incomparable measure of wealth. Like governments and central banks, ordinary citizens can also invest in gold and enhance their financial well-being. About 50% of the consumption of gold is in the form of jewelry, 40% is in investments, and the rest is used by various industries.
Gold supply will continue to diminish, resulting in higher monetary value, making it a perfect financial stability measure.
4. Rising Demand& Shrinking Supply
The biggest bugbear around a commodity like gold is that demand eventually overcomes supply. According to a famous saying, “the cure for high prices is a high price.” But for gold, not so much.
Farmers plant soybeans to meet demand if prices increase, gold miners can’t do the same. The production of gold has remained relatively flat.
Moreover, the increasing wealth of economies has increased the demand and price of gold. In mega-economies like China and India, the demand has been steadfast. Hence, investors are becoming more interested than ever in allocating a big chunk of their money into gold investments.
5. Protection of your Purchasing Power
Minimizing potential risks helps you make better investment decisions. And one of the safest decisions you’ll ever make as an investor is buying gold bullions.
Long-term challenges to currencies, a high debt-to-GDP ratio, and aggressive monetary policies tend to increase inflation, resulting in declined purchase power.
6. Central Banks Are Filling Up their Gold Vaults
According to the World Gold Council, central banks have been increasingly filling up their vaults with gold bullions to diversify their reserves. In fact, investors tend to be attracted to buying shares and stocks in banks that hold many gold reserves.
7. More than Just a Commodity
Gold is a global asset that’s driven by the scale of demand and supply. But like any other commodity, supply will only continue to diminish for gold, making it more and more valuable in the future.
Moreover, human psychology, when it comes to investing in gold, can’t be ignored. It’s always the safest investment option because it’s your best bet during a recession.
8. Behaves Better With the Currency
For ages, gold has served as a medium of trading goods and services. The current global standard came about just a hundred years ago, when WWI broke out. It’s the lack of credit today which makes gold such an attractive investment.
Due to all of these factors, gold behaves in line with currency, as it has the highest correlation with it compared to silver, platinum, & palladium.
9. Cushioning Support during Drawdowns
Gold is a multi-faceted metal. It’s dynamic and highly favorable for all kinds of financial situations, even when the economy is crashing. The resilience of gold makes it a supportive asset for investors.
10. A Brilliant Diversifier
The best way to diversify your investment portfolio is by investing in uncorrelated investments. And historically, gold has been negatively correlated with stocks, real estate, bonds, and other investment options.
According to the seminal work of Richard and Robert Michaud, investors should hold 2% to 10% gold in their portfolios.
11. Zero Counterparty Risk
Gold will always be the last man standing among all your investments. Investing in physical gold will never leave you bankrupt, because it involves zero paperwork or third party interference. It will always hold monetary value as well.
12. Excellent Liquidity
Gold is a highly liquid precious metal because its demand never fades. You can quickly sell your gold bullions online, in a coin shop, pawnshop, or to a private dealer. It can be sold for cash or traded for goods.
You can carry this liquidity-intensive metal anywhere in the world and trade it for any currency you want.
13. Low Maintenance & Carrying Costs
It’s easy and affordable to store gold bullions. For instance, if you compare physical gold to real estate, you’ll realize that no repair and maintenance costs are associated with gold storage. Tax costs are lower as well.
14. No Specialized Know-How Required
Can you identify a real diamond? Can you distinguish between two similar paintings? Can you tell whether an antique chair is actually antique? Most people will answer no.
Investing and working with physical gold bullions requires no special education or knowledge. It’s a relatively straightforward investment and involves minimum expertise and technical skills.
15. Historical Storing Value
Even though modern currencies are not backed by gold anymore, precious metals’ value doesn’t fade. Gold remains highly coveted even when the worth of all other investments depreciates, making cash and stocks less attractive. Moreover, gold has been passed onto generations as a sign of family and business wealth.
It’s unique, bright color, malleability, and strength make it easy to work will and mold into coins, jewelry, or any other shape.
16. Skyrocketing Government Debt
Increasing government debts makes the economy more prone to turmoil. Hence, investors look toward investing in gold to safeguard their existing assets and improve their portfolios’ future value.
17. Negative Real Rate
The most substantial drawback of high inflation is a negative real rate. Gold is beneficial when the difference of nominal rate and consumer price index turns negative. This has historically pushed investors toward investing in safe metals like gold.
Diversify Your Portfolio & Returns by Investing in Gold Today
We’re a gold and silver investment company that deals in the exchange of precious metals for the financial security of our investors. At Orion Metal Exchange, we offer our services to help you invest in gold to make money and secure your gold investment with safe storage. Contact us today to learn more about our services.