Gold has been around for thousands of years, with first gold coins appeared around 800 b.c. In these days volatile market one should ask himself if owning a gold is a smart investment. We believe so. Paper currencies come and go, some of them losing value along the way, while gold maintained its value throughout the history. Gold is an excellent way to preserve wealth.
However, gold as investment doesn’t bring much returns, so one should consider why he should invest in gold. Here we explain some of the reasons why investing in gold is a smart move these days.
Inflation and deflation
Gold is an excellent hedge against inflation and deflation. Gold price rise in time of inflation, while stock market can plunge. In time of Great Depression in 1930s some people lost most of their money when stock exchange crashed, while gold prices soared and maintained its purchasing power.
Political and economic uncertainty
With tensions and wars in the Middle East, or elsewhere, we live in times where reality is jeopardized economic environment. Gold can be considered as a safe haven during political and economic uncertainties. Currencies may collapse, countries may fall, there can be a political coup…, all while gold maintain its value or even gain value. This is how investors can protect their wealth and even protect their safety as they can use gold as an escape if they live in war zone.
Gold is undervalued (at the moment)
Although gold more than doubled between 2002-2007, it is still extremelly undervalued. While paper money can be printed (and thus losing value), there is limited amount of gold, with demand stronger than supply. In case of hyperinflation period, money lose all its purchasing power, while gold maintains its value. Those who invest (only) in paper currencies, which are not backed by the gold, will lose significant part of their wealth. Demand for gold is accelerating, but this is just the beginning. Only about 1% of worldwide savings is presently invested in gold, unlike historical times, when this number was around 15%.
Central banks are buyers of gold
Not that they no longer sell gold on the markets, but they accumulate it to limit their exposure to the loss of their collapsing currencies.
Gold is universal money
It won’t go bankrupt or broke. Gold bullion will always preserve owners wealth. It is not artificially created by the government, but it is a tangible store of value. Over the long term currencies are worth less and less until they are finally worthless. Gold bullion investments are portable, liquid and easy to store.
Regardless of whether you are worried about political and economic uncertainty, inflation and deflation, or a declining US dollar, or just want to protect your wealth, having a gold is a smart investment. It will diversify your portfolio, making it much more stable. Gold doesn’t depends on stocks, bonds or real estates.
Physical gold will always maintain its value. It won’t go broke. There is no issuer behind it, so you don’t have to rely on government promises, like with paper currencies. Gold is a hedge against inflation and deflation and safe haven in political and economic uncertainty. You can actually see it and touch it, unlike stocks. Finally, gold is still extremely undervalued and reasonable investment to protect your wealth.