Gold has been seen as a wealth and status symbol since time immemorial and is unarguably one of the safest investment options out there. This is majorly due to its low volatility and ability to hedge assets during times of economic turmoil and inflation. Investors also like to keep gold as an investment choice in order to diversify their investments, thus lowering overall portfolio risk. In addition to this, the return on gold investments has proved to be good over the years. Here are some of the top reasons why you should consider investing in Gold:
People have always perceived gold to be a way to pass wealth from one generation to the next. Because of this, gold has maintained its value throughout history. Even though gold is not used as currency today, it has been the mode of payment longer than any other form of currency. This is due to its inert properties and ease with which it can be molded into any shape-be, a coin or bar. It also helps that gold valued at millions can be safely kept in a small box. Gold officially used to be the measure of exchangeable value. However, this was changed after U.S President Richard Nixon cut off all links between the dollar and gold, which resulted in the U.S dollar replacing the role of gold as a universal measure of value. The importance of investing in gold only becomes clear when the value of the dollar falls against other currencies. In such instances, as in the case of the 2008 financial crisis, the value of gold has always shown a substantial increase.
Over the years, when the purchasing power of currency decreases due to inflation, gold has always increased in value. This is partially due to the high demand for gold investments during inflation. Another reason for this increase in the value of gold is the decreased purchasing power of an existing currency. During inflation, the price of everything increases, and this includes gold. Thus, investing in gold acts as a hedge against inflation, as the ROI of gold investments is way higher than the inflation rate.
Similar to the case of inflation, the value of gold increases during deflation. Deflation is a period in which prices of commodities decrease due to increased purchasing power. When people have an increase in purchasing power, they choose to hold that cash in gold. An example was the 1929 Great Depression when gold prices soared to an all-time high. Another reason for this trend might be the tangibility of gold as an asset.
Gold is known as the ‘crisis commodity’ due to its unvarying value during a financial crisis or geopolitical uncertainty. Gold outperforms all other investments during such crisis times as it is a tangible liquid asset. In addition, gold mining has been showing a decreasing trend, and gold reserves will eventually run out, just like fossil fuels. This is another reason to invest in gold as the demand increases when supply decreases.