Tuesday, August 24, 2021

Why Should You Consider Investing In Gold?

Because of the economic impact of the COVID pandemic, the stock markets have been volatile the past eighteen months, prompting most investors to look for measures to diversify their portfolios and protect themselves against further losses. Over the course of this time period, one asset began to gather momentum: gold. If you have been thinking about investing in gold but are not sure where to start, here's a simple guide to help you get started with gold investment. Let’s take a look. 

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Why Should You Consider Investing in Gold?

While people all across the world have brought gold for a variety of reasons, most of which are cultural or religious in nature, gold has also gained popularity as an investment choice. Here are a few factors that are working in favor of gold right now.

  • The gold standard has long been considered the ideal long-term store of value because of its ability to retain its value over time. By store of value, we mean an asset that maintains its value without depreciating. Due to the fact that it can function as money, it has a distinct advantage over other currencies, and its outperformance of the value of the national currency makes it particularly appealing. You can find out more about what is the gold standard here. 

  • It will always be valuable — Currency is a promise to pay, so it will always be valuable. Gold, on the other hand, is not dependent on such assurances. It is the only financial asset that is neither a liability nor an obligation of another party at the same time. Gold prices have never fallen below zero in their more than 3000-year history. As a result, it will always be valuable and will remain strong even if the economy and markets crash to the ground.

  • Inflation hedge - When inflation rates rise, the value of a currency falls in value, creating a hedge. Gold prices, on the other hand, have more than doubled in the last five years, despite the fact that inflation rates have increased. In countries where inflation rates tend to outpace interest rates, investing in gold is a good way to protect against rising inflationary expectations. 

  • Aspects of the gold investment that are critical to consider include liquidity and diversification. When it comes to gold, transactions can be completed in a relatively short period of time.

  • There is no need for specialized knowledge - When you buy stocks or mutual funds, you need to have a basic understanding of the market and economics in order to make the best selection. Such knowledge is not required while dealing with gold. It is basic and uncomplicated, making it a simple investment for all types of people to participate in.

  • As an asset class, gold has a low or negative correlation with the other asset classes, which aids in the diversification of your investing portfolio. Therefore, it is beneficial in terms of diversifying or hedging your investment portfolio against the risk of a volatile market.