Gold is a safe asset to own, particularly during economic turbulence. The world dealt with the COVID-19 pandemic in 2020, which affected economies worldwide. After that, the demand for gold has risen rapidly. When you invest in gold, you’re helping to secure your financial future.
While other investment avenues like real estate and currency are associated with high risks owing to specific situations and market fluctuations, gold is a relatively stable investment option. Investing in gold has many benefits, and we will examine why it’s a wise investment option. And the best part? You don’t need deep financial knowledge to invest in gold. However, you need to be aware of the gold rates before you start your investment.
Gold Protects Against Inflation Risks
Inflation is the rate at which money loses value over time. This fact needs to be understood when it comes to investment. This is also why you should not have your cash investment, as its value will depreciate over time. Instead, when you invest in gold, it will protect you from inflation. Gold has consistently outperformed the inflation rate over the years, which is why it’s a preferred investment option. Before investing in gold, be sure to track the rates over time and monitor the fluctuations in the market so you can start your investment in a thoughtful and systematic way.
Gold Is a Tangible Asset
As one of the few tangible assets, gold creates a sense of safety among investors. Besides, buying gold is much easier than buying other tangible assets, such as real estate. Moreover, intangible assets that are stored digitally are more susceptible to misuse and hacking, and gold is free from this fear. On the other hand, other risks are associated with storing and safekeeping gold, so it’s essential to be aware of them.
Gold Is Highly Liquid
Gold is easy to buy and sell and can be carried in your pocket wherever you go. Any jewelry dealer in the world – be it a local coin shop, an online dealer, a pawn shop, or a private entity – will recognize gold and buy it from you. The process is also much easier and faster than selling a stock in your brokerage account. The liquidity of gold also means that you can take gold with you anywhere in the world.
It Won’t Go Bankrupt
Gold is the only asset that is not someone else’s liability simultaneously. No intermediary is required to fulfill a contractual obligation, and no paper contracts are needed to make it whole. So, in an economic crisis, gold will stand tall. Therefore, it’s a powerful asset to have in your portfolio since gold will not go to zero – it will always hold value if its 3,000+ year history is anything to go by.
Gold Serves As an Inflation Hedge
This is the traditional motive behind gold investments. In the long run, nearly all major currencies have depreciated in value relative to gold. Simply put, gold has the power to stay on top, even in the event of an economic collapse. This means that when other investments are losing value due to hyperinflation, gold can increase in value. For example, in the 1970s, inflation rates averaged 5% yearly and rose to 13% by 1980. Within this decade, the value of gold skyrocketed from $35 to $850. Historically, gold has performed exceedingly well at times of inflation, and it’s safe to assume that it could continue doing so.
Does Not Require a Lot of Maintenance
When investing in an asset like property, you must maintain it well and do timely repairs. On the other hand, gold can be safely kept in a locker without needing maintenance.
Offers Financial Privacy
Gold is an asset that is not tied to a financial institution or a country. Therefore, it’s difficult for governments and other entities to track your gold holdings. You can store your physical gold in a safe place that is out of the banking system, and this protects the risk of your assets being frozen or seized.
Helps To Diversify Your Portfolio
Having a diverse portfolio helps to reduce the risk of individual stock investments. When you spread your money across different stocks, you minimize the risk. For instance, if Investment X performs poorly, Investment Y might still do well and help to offset some of the losses.
At times of market volatility, gold investments are a safe set. Thanks to its low correlation with other major asset classes, it’s an excellent portfolio diversifier. Moreover, the macroeconomic and microeconomic factors that affect returns for many asset classes don’t affect the price of gold. On the flip side, when a stock’s value falls, gold’s value rises, making gold investments a great diversifier.
Gold Can Be Passed Down Easily
Gold can be passed down to the next generation, as is typical across traditions. Many people give gold ornaments to their loved ones during significant moments in life, like a marriage or childbirth. So, by collecting physical gold, you can build a strong pool of assets that can be easily gifted to family members. Gold can be passed down quickly and will retain its appeal even decades later.
Gold Is a Smart Investment Option During Political Crisis
When the trust we place in the government dwindles, people turn to gold as a safe investment option. It offers stability and better returns than other investment assets like bonds and stocks. So when stock markets crash, and tensions rise, gold prices tend to move in the opposite direction to other financial assets, making it a profitable option for investors.
Conclusion
Gold is one of the most treasured metals in the world, and it has been respected for its value for thousands of years. Today, economies have placed massive value on gold, increasing its worth and demand. Since gold is the metal we fall back on when other currencies decline, it’s safe to say that gold serves as insurance against tough times.
