This precise metal is known throughout the world for having a rich history and for holding its value. Since the year 650 B. C. gold coins were used for the purpose of making transactions with them. From then on, individuals have continued to invest in and keep hold of gold for a number of different reasons. Some of these we will take a look at in detail below.
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1. Increasing demand
Due to the growth of the world’s emerging markets, there has been a marked increase in the demand for gold. One reason for this is that in those counties, such as India and China, the precious metal is very much intertwined in their culture. For instance, Indians use gold for making jewellery and it is worn at very many weddings too. The Chinese use gold bars as a form of saving rather than fiat money.
2. Retaining value
Different to paper money, coins, or any other sort of financial assets, gold always has and always will hold its value. For many people, gold is seen as a way of passing on and preserving their wealth, passing it down from one generation to another in form of gold jewellery, precious gold bars, gold coins and gold bonds.
3. Hedging inflation
Throughout the years, gold has always maintained a good hedge against rising inflation. The reason for this is that the price of the precious metal typically increases as the cost of living rises. In fact, in the last fifty years, the price of gold has skyrocketed, even in the face of share prices falling and economic crashes. The reason for this is that gold is seen by many as a great way of storing value and so they are encouraged to invest in it when the currency that they use is losing some of its value.
4. Combating Uncertainty
Even during times of financial and geopolitical uncertainty, gold holds its value. For this reason, it has earned the moniker – crisis commodity. This is why so many people turn to investing in it when global situations and tensions arise. Because of the worldwide coronavirus pandemic, the price of gold has moved around a lot. It is when people’s confidence in their governments is at its lowest is when the price of gold is typically at its highest.
5. Diversifying Investment Portfolios
Because the price of gold has historically always had a negative correlation in regards to the price of financial investments, such as stocks and shares, it is a good asset to invest in for the purpose of diversifying an investment portfolio. For instance, the decade of the 1970s was really good for gold, but pretty disastrous for the price of stocks and shares.
Conversely, during the 1980s and the 1990s, stock and share prices rose whilst the price of gold dropped massively. Buy combining these things, it helps to bring down the overall risk and volatility of an investment portfolio.
If after reading the above you feel inspired to invest in gold yourself, then make sure that you keep up to date with the very latest information by visiting Gold IRA Companies.
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