Markets may rise or fall, but there’s always a demand for gold. Even in declining gold markets – which we have seen over the last few years – many investors still prefer to have a portion of their portfolio in gold. Here’s why.
Gold can never lose its entire value
Companies go broke, and so do countries. On the other hand, if you own gold, it will always maintain a value. It can’t go bankrupt, default on debts, or lose out to the competition. Physical gold always has an intrinsic value – there is a demand for it beyond pure speculation. Whether it’s for jewelry or electronics, people are willing to pay for the yellow metal, even if it’s out of fashion among investors. Because of this intrinsic value, gold will never go to zero.
Gold is a safe haven
In uncertain times, markets are often hit by huge amounts of volatility and declines in the values of equities. You only have to look at what happened to the oil market over the last little while to see how easily billions of dollars can be wiped off the value of investments. However, when crisis strikes, investors need somewhere to keep their money safe – and gold may be one of their preferred instruments. Because of this, the price of gold bullion usually rises steeply when there is economic or geopolitical uncertainty.
Gold is not created by governments
Gold exists independently of governments, and its value does not depend on them. This means that it is relatively isolated from the influence of individual governments – and of any poor monetary or economic decisions they make. If you compare this to investing in a currency for the long term, you will realize that the poor economic performance of a country may quickly devalue their currency. Also, governments tend to print more currency than they should, which inevitably drives long-term devaluation. On the other hand, gold tends to maintain its purchasing power in the long term.
Gold is portable and liquid
Gold by its nature is an incredibly dense concentration of value. With prices at over $1,000 an ounce, you may easily carry $250,000 worth in one hand. While this may not be a consideration in some economies, the ability to carry gold and even keep it in your home is a major factor that drives demand in countries such as India. Gold is also very easy to sell – wherever you are, you may almost always find a ready buyer.
Gold is anonymous and private
While buying stocks and other types of investment vehicles is heavily regulated in most countries, gold can be bought and sold privately. In fact, it’s easy to buy gold online, without any oversight. Selling is just as easy, and can even be done anonymously in some countries. Because of this, gold gives investors a degree of freedom and control that they may not be able to enjoywith traditional equities. Again, this makes gold possibly an excellent hedge against political and economic turmoil – giving investors an easily convertible way of storing and transporting wealth.
Source:: 5 Reasons Traders Choose Gold