Thinking of investing in gold? You’re in the right place. Gold is excellent as a direct investment, as safe haven and a hedge.
Research shows that gold is your best bet in the midst of a stock market crash as well.
Let’s talk about the reasons on why you should invest in gold:
Direct Investment
Cryptocurrencies such as bitcoin may hog the spotlight in today’s market, but gold is still king when it comes to direct investment.
Gold is one of the few precious metals that constantly see an increase in value. To take advantage of this, investors often purchase gold as a direct investment so they could ‘cash in’ when the price is right and as its value improves.
It’s a known fact that gold is a precious and resource-limited metal, and that the demand for it will drive up its value. Also, gold has many uses, especially in the fashion and electronics industry.
Right now most of the gold are held by nations and billionaires. In the United States, gold is seen as a kind of legacy, and part of that legacy involves keeping them. One prime example is gold that’s stored at Fort Knox since 1937!
That said, if governments and investors were to sell huge quantities of gold it can disrupt markets in an unprecedented scale.
Safe Haven
A safe haven in investment terms means individuals can get protection from a financial catastrophe.
There are a few examples of why gold is widely considered to be an excellent safe haven. Investors know that it can protect them against uncertainties- in the Eurozone crisis, the price of gold rose even when everything else went down.
History repeated itself with the Dodd-Frank Wall Street Act, Obamacare and the 2011 debt ceiling. All throughout these worrying events investors continued to trust in gold to provide them a safety net.
Similarly, people who know better consider gold as an investment against an economic collapse. Time and again gold prices rose (and sometimes even doubled) during serious economic uncertainties. For instance, the metal enjoyed a nice boost to $869.75 in 2008 and a meteoric increase to $1,895 in 2011.
Hedge
A hedge in financial terms is something that can mitigate loss in one of your other assets.
Investors usually purchase gold as a form of hedge against the decline of a world currency, e.g., the US dollar. Currencies rise and fall, and with it are consequences like inflation and rising import prices. When these things happen gold can come to the rescue.
Throughout history we can see how gold was used as hedge versus the USD. From 2002 to 2007 the US dollar fell to about 40 percent versus the euro; in the same period gold prices more than doubled in value, from $347 to $833 per ounce.
The same thing happened in 2008- investors, fearing the effects of the financial crisis called upon gold’s hedge power to protect themselves against the quantitative easing program and the record-level deficit.
During that year, the Federal Reserve opted to get bank Treasurys in exchange for credit, which was created out of thin air. Then, deficit spending caused a record debt to GDP ratio up and beyond the 77 percent critical level. Investors thought that both instances can lead to inflation, increase the US debt and lower the value of the dollar.
Why Choose to Invest in Gold?
Everyone knows gold as a precious metal, and there are people who hold it dear to their hearts.
Gold has a unique history and an equally amazing characteristic. Arguably, gold was the first currency that was recognized by the whole world. It became the ‘standard’ of money and all that came after it.
The word ‘gold’ confers a kind of familiarity. When people think gold, they think value. No one will think that gold will lose its inherent value, and therefore we associate it as a safe source of money.
Gold is uncorrelated with oil, bonds and stock. It moves on its own accord, even when other asset classes do. Furthermore, it doesn’t depend on the rise and fall of bonds and stocks (as is often the case with one another).
In retrospect, gold is a universally-known asset, one that’s unaffected by stocks, currency and financial states. It’s grounded in safety and can play an important role as a direct investment, hedge or safe haven. For this reason it’s sensible and wise to consider investing in gold.
Gold can be a direct reflection of sentiments, which cements the precious metal as a rock-solid investment for those who want a well-spread portfolio that can survive the challenges of the modern economy. Moreover, gold’s unflinching characteristic makes it a stable asset when all others, e.g., bonds, stock and currency are experiencing a downward trend.
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