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Why Invest in Gold
From thousands of years ago, gold has always been a big deal. We say it’s a big deal not only due to its worth but also because investing in gold has somehow always proved to be the best way to avoid inflation. Individual retirement accounts have been brought down by inflation especially for those investors who mainly focused on the stock market, real estate and private equity. But buying a precious metal like gold for your IRA account will always prove to be worthwhile. Here’s why.
Why gold is better than most precious metals/paper currencies
While investing in precious metals like silver and platinum can still bring you some good returns, most people prefer gold because it is incorruptible. Silver and platinum will tarnish and react with oxygen respectively depending on the conditions they are subjected to. But gold can always be polished to look brand new. This is because gold is a stable metal that doesn’t react with other elements. And in a similar fashion, gold is economically stable. Unlike things like paper currencies whose value will fluctuate depending on how well the economy is doing, gold has a history of maintaining its value and can go up even in the verge of difficult economic times. It’s due to this reason that people are buying gold as a form of preserving their wealth.
Inflation and deflation
Gold has had a remarkable performance during times of inflation and also deflation. Inflation is basically a period when the economy of a nation is struggling and the cost of living is high. During these times, gold prices tend to increase and that’s why the precious metal is often regarded as a ‘hedge against inflation’. Deflation on the other hand is when the economy is also struggling and business activity is quite slow. During deflation, gold has been seen to perform well too.
‘A crisis commodity’
The reason why gold is referred to as a crisis commodity is that, it seems to maintain its value even when the economy is facing a crisis due to political reasons, war and other world tensions. It has been shown that gold prices go up when there is political instability and people don’t have a lot of confidence in their governments. In times of uncertainty, a smart investor will not look at the stock market or real estate which is likely to be affected by environmental factors. Gold will retain its value in times of financial insecurity.
Diversify your portfolio
A smart investor will always look for investment opportunities that are not closely related to each other. That’s how you end up with a diversified portfolio. There’s a significant difference between gold and other forms of investments like stock market and real estate. By investing in gold and maintaining other financial instruments, you will have a diversified portfolio and reduce your level of risk when things go wrong economically. Diversification is used to minimize risks and overall volatility in an investment portfolio that’s why it’s very important. You can have at least 5% of gold in your investment portfolio. Diversification has always proved to be a great way to immerse wealth and gold, being economically stable, can help you to achieve that.
Increase in demand
Gold has always been a highly demanded product in most emerging economies. In so many countries, gold is considered as an item used to make the best jewelry and sold at a very hefty price. People will buy jewelry items made from genuine gold at absurd amounts simply because of the kind of value this precious metal gives. In fact, that is the reason why gold will always be in high demand. Weddings are always celebrated in every country and they use expensive jewelry items made from gold to mark the occasion. Research has even shown that October is when gold is in the highest demand in most countries. This is because the wedding season begins in October in most countries and people invest in expensive jewelry during such occasions. Other than being used to make jewelry, gold bars have also been in high demand because they are regarded as a traditional form of saving. And among investors, the demand for gold is even greater as the years go by. Not so many people own substantial amounts of gold today.
Low production of gold
One of the things that may reduce the value of gold is when the precious metal starts being produced more. But this is not expected to happen anytime soon. The production of gold is very expensive and only a few mining companies can be able to meet the cost. In fact, the economic crackdown has made it even harder for mining companies to invest in structural components that will boost the production of gold. This has made it even more difficult to mint gold. So the physical gold present is stable and this minimizes the chances of pulling the price of gold down.
All currencies are based on paper money
There’s no single currency that is safe from the wrath of inflation. Whether you invest in euros, yen or Swiss franc, no world currency can act as a guard against inflation as well as precious metals do. Even countries are investing in more tangible assets in order to protect themselves because the world reserve currency which is the dollar is facing serious inflation. Gold is a better alternative to paper money because it maintains its value even when the environment is going through an economic downturn.
Gold can be a suitable investment if you want to get a more diversified portfolio and it also reduced your risk since prices will increase even when the economy is struggling and paper investments are decreasing in value. Through the years, gold has been considered as a great retirement investment for individuals who are looking for monetary stability. Take your time when you think of expanding your investment portfolio and look for other forms of investment like gold. It could be the one investment that changes your life for good.