A modern and dynamic economy presents plenty of investment opportunities. Some opt for stocks, bonds, and ETFs. Others choose more unique assets like real estate or cryptocurrencies.
However, just about every investor would be more than happy to add physical gold bullion to their portfolio. The shiny yellow metal has long been desired for its value and stability, leading people from all walks of life to research how to invest in gold.
Gold might not be as exciting as an asset like virtual currencies, but bullion remains a smart and savvy investment choice for many reasons. Keep reading to learn more about why it is a smart move for any investor to add gold to their portfolio.
Gold Remains An Effective Asset To Protect In Times Of Economic Turbulence
Gold has traditionally served as an effective inflation hedge. The price of the precious metal often rises in years with high inflation – as the stock market plunges. Since gold is usually priced in fiat currency units (which lose purchasing power to inflation), the precious metal jumps in price as the cost of living does the same. Many people often flock to gold in times of economic insecurity and concern. The metal’s almost tripled between 1998 and 2008 and nearly doubled once again from 2008-2012.
Fiat currencies today like the U.S. Dollar struggled under the weight of America’s large deficit, budget, and increases in the money supply. These elements look to only continue to raise the value of gold in the coming years. This is the basic knowledge you need to have before you decide to invest in gold while more details about different ways to invest can be found on Goldcoin.com.
Supply and Demand Concerns
The vast majority of gold transactions since the 1990s are carried out by central banks that sell gold from their vaults. However, gold-selling by these financial authorities has decreased sharply in the last few years. The supply of bullion has also been in a steady decline over the last two decades.
Much of the world’s gold is mined in South Africa, a nation plagued with political instability and issues with electrical infrastructure. Both factors inhibit the ability of mining companies to work. COVID-19 has also taken a toll on gold mines as workers have been forced to stop mining at certain points in time, creating a gold supply crunch.
While gold mining opportunities have started to emerge in nations like Sudan, Mali, and Burkina Faso, these countries also have complicated geopolitical situations that can make work difficult. It usually takes five to ten years to bring a new gold mine into production. Overall, the supply of gold bullion has remained somewhat static and could even start to decline if buying habits begin to pick up – increasing the price of the precious metal.
At the same time, gold demand is starting to rise as emerging market economies begin to desire precious metals. Gold demand in China, a rapidly rising economic superpower, is driven by cultural aspects where gold bars are seen as a traditional way to save money. In India, gold demand continues to rise as the metal is used in a wide range of jewelry, especially during October, a traditional wedding month.
Volatility Remains Lower Than Other Commodities
While high compared to other precious metals like silver, the spot price of gold maintains lower volatility than many assume. Many commodities often move in a manner opposite of the stock market, but outside factors like the weather and instability can quickly alter the price of oil, diamonds, and even real estate.
In contrast, the demand for gold remains relatively constant. The jewelry industry, which accounts for 50% of global gold use, is a sector of the economy where the activity is always occurring. The spot price of silver remains more volatile than gold due to differences in the market size and the heavy industrial uses of the metal. In general, the activity of gold mines takes a longer time to respond to fluctuations in the spot price of gold. Gold’s lower volatility makes the metal a smart commodity for investment purposes, as buyers do not have to worry about external factors altering their investment.
Stocks Vs Gold
Even if you are a stock trader, there’s one good reason why you should consider gold as well. These two “currencies” have never seen eye to eye. In other words, when stocks were dominating the market and when they were stable and increasing, the value of gold dropped and vice versa. The moment stocks drop and lose value and the world faces an economic crisis, people turn to gold.
Having a bit of gold in your pocket makes you prepared for the turbulent years to come! IBy combining gold with stocks, you can create a portfolio that reduces volatility and risk as well. Therefore, you will be sure that you cannot lose it all since these two things contrast each other. In fact, you might lose on one end and you will win on the other, and be balanced out. Now, it is your skills that you should use to oversee when to switch from one to the other for maximum gain.
All investors should take the time to add gold bullion to their portfolio. The metal maintains its value well, is highly desired, easy to buy, sell and trade, and serves as a stable and effective hedge against inflation and economic downturn. Buyers often have a wide range of bars, coins, and rounds to choose from, either from an online retailer or an in-person dealer.
As we have already said, gold has attracted our attention from the earliest times. There’s something about it – the yellowish glow, the ease of handling, the ability to melt it under the flames and turn it into coins…We’ve valued all of these things throughout the years, and we will continue to do so in the future. The value of gold never seems to dwindle.