- Gold has a long history of increasing value.
Since it was discovered, gold has been a commodity coveted by people and used to store wealth. Although most central banks have recently stopped using gold-backed currencies, gold remains immensely valuable, especially during economic downturns. Unlike coins and banknotes, gold has remained stable over the centuries. Investors can bet on gold to pass on their wealth to future generations gold ira.
- Reliable coverage in times of crisis
Historically, gold has performed well as a reliable hedge against inflation and other crises. It has seen price gains even as living costs continue to rise in 2022. When the world’s major economies suffer from high inflation, their currencies lose value and the yields on their treasuries become unfavorable. This phenomenon leads investors to focus on gold because cash and treasury yields become less effective as safe haven resources. Over the past 50 years, gold prices have risen continuously, and stock indices have plummeted whenever there has been a period of high inflation. - Gold helps you diversify your portfolio.
It’s wise to have more than just common stocks in a portfolio. If examined over more than a decade, gold helps reduce losses during an economic downturn. It has excellent power to improve the risk-adjusted performance of a portfolio. Gold futures or ETFs provide you with a liquid asset while maintaining a low correlation with other asset classes during an economic boom and depression. With the financial investment recommendation that good portfolios should have less correlated assets, gold is an excellent choice because it is negatively correlated with stocks. - Demand for gold continues to increase.
As emerging economies continue to prosper, new wealth has increased consumer demand for gold. There are also countries where gold items are part of the culture. For example, India is the largest consumer of gold in the world, and this is because the ownership of gold jewelry is widespread. Total gold ownership in Indian households exceeds that of the top 5 central banks. Giving gold jewelry and decorating the home is a common culture in Asia. China and India are the world’s largest consumers of bullion. The rapid growth of the middle class is already a good investment lead for dummies who plan to trade gold and are not sure about the demand.
Demand is expected to grow because the cash-strapped middle class has a greater appetite for gold jewellery, rings and related accessories. Over the past decade, institutional investors and fund managers have flocked to gold and precious metals as investment channels due to the popularity of online trading. They are a liquid investment channel to allocate funds and benefit from small price variations.
- Global public debt is at an all-time high.
Total global public debt has continued to increase each year. Total debt at the end of 2020 was $284 trillion, which is expected to rise throughout 2023 as many economies have no choice but to continue borrowing. The large deficits experienced by major global economies may also mean that another financial crisis could be brewing. Should I invest in gold now? Yes. Astute investors should take this as a sign to hold gold as a safe haven asset that will protect their investment portfolio.