Should I Invest in Gold? – 7 Reasons You Should
by Francis Alukkas | 21 September 2021 | GOLD JEWELLERY
The value of gold dates back centuries, with cultural, social and economic values woven into it. Now, economies are seeing value in gold more than ever. Investment decisions for many are now plagued with the dilemma “Should I invest in gold?” The answer is yes although not solely in gold.
So, here we have compiled 7 reasons for you to consider if you have been wondering if gold is a good investment in 2020 and asking around “Should I invest in gold?”
Value Rooted in History
Revered since thousands of years, many cultures consider gold as a legacy and a form of wealth that can be passed on through generations. Gold is also a very unique metal. It is non-corrosive and easily melting. This makes it easy to mould and work with. The colour of gold is eye-catching and one of the most important reasons it is much loved as jewellery.
Even if gold value can drop for short terms, the long term trends are favourable if you have been weighing the advantages of investing in gold.
Also, Check: Easy Gold Investment Scheme
Hedge Against Inflation
Gold has repeatedly proven to be a trustworthy hedge against inflation. This is because, when the cost of living increases, the price of gold also increases. Gold price has hiked unbelievably in the past 50 years while the stocks have dipped. When inflation occurs, currency loses its purchasing power. Gold is then priced in those currencies and consequently rise alongside. When the local currency value drops, people find it a safe investment to buy gold.
Protection Against deflation
During deflation, the prices decrease, business activity slows and the economy is heavily indebted. A global deflation has not been witnessed since the Great Depression in the 1930s. A small deflation had affected some parts of the world after the financial crisis in 2008.
History has it that the purchasing power of gold was relatively highly while other prices decreased, during the Great Depression. Gold was the safest currency then and investments in gold became the most favoured means of holding cash. This reliability of gold makes it an inevitable reason when it comes to the benefits of gold investment.
Safety During Financial and Geopolitical Uncertainty
Financial uncertainty spares no economy. But there is a more serious situation when financial safety is of paramount importance – geopolitical uncertainty. Gold is nicknamed as the ‘crisis commodity’ because it is a relatively safe financial investment when the world is tensed. When the governments are not sure of themselves, the gold prices tend to rise and people believe it is the safest haven.
So, even when there is no geopolitical uncertainty, investing in gold will buy you a safe zone to be in, should there be a geopolitical uncertainty in future. You will have more value at hand than buying gold during the uncertainty.
Limited Supply
Gold deposits, after all the mining and extractions done so far, is depleting. Most of the market supply since the 90s came from the vaults of global central banks, which decelerated in 2008. Since 2000, new gold production from mines is running very low. It takes about 5 to 20 years for a new gold mine to produce. As supply reduces, prices hike and it is wise to invest in gold while you still can, if you have been asking “Should I invest in gold?”
Also, Read: A Glimpse at Gold Price History in India
Increasing Demand
China and India are the countries importing gold the most. It has more to do with the cultural trends. Gold jewellery is a staple in Indian weddings and the highest global demand for gold is from October, when the wedding season in India begins. The Chinese invest in gold bars as a tradition. Investors now view gold as a potential investment and many invest in gold trust funds across the globe. With increasing demands, the supply becomes limited and if a wedding is just around the corner, do not forget to remember the benefits of buying gold jewellery when you can.
Diverse Portfolio
If you are still asking yourself, “Should I invest in gold?” let’s talk about diversifying your investment portfolio. Choosing investments that are not correlated ensures safety when one or the other face a drop in value. Gold has had inverse relation with other financial instruments including the stocks. A balanced combination of investments in gold and stock and others will cushion the risk of loss. It is wise to set aside a portion of your investment portfolio for gold among others.
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