Gold prices are inversely correlated with the USD. When investors lose confidence in the currency, gold prices go up and vice versa. This is exactly the reason why gold remains an important investment commodity. When the stock market goes sour, people can always liquidate physical gold to cover their assets.
The world has long left the gold standard but there are plenty of reasons why people should still invest in the precious yellow metal.
Here are some reasons to consider gold as part of your investment portfolio.
A commodity that holds its value. Unlike fiat money, gold has maintained some form of value as a precious metal throughout the years. A lot of people invest in gold to preserve their wealth from one generation to another. Gold is useful no matter what form it’s in (jewelries, coins, small bars, etc.). However, the good delivery gold bars yield the highest returns since they’re assayed at a purity level of 99.9%.
Diversification spreads the risk. Investors can lose a lot of money if their portfolios are not diversified properly. Diversification is the only way for investors to survive the volatile market and gold can help them do that. Gold doesn’t yield high interest rates or even provide regular investment returns. However, when stocks and currencies lose their value, it will be the only investment people can use for trading products and services.
Gold holds its value as a tradable commodity not only in times of uncertainty, but also in the event of a political turmoil. Some investors store their gold in overseas vaults so they can rely on it in case another nation invades their home country. In case of an invasion, the invaded country’s currency loses its value.
Inflation. Gold is a great hedge against inflation because its prices tend to skyrocket when the cost of living rises. It was after the World War 2 when the U.S. experienced the highest inflation rates (1946, 1974, 1975, 1979, and 1980). During those years, the Dow Jones Industrial Average was at a demoralizing -12.33%, while gold was at 130.4%.
Gold prices are very low right now. In 2011, gold’s prices peaked at more than $1,800 per ounce. Now, it’s merely swinging at around $1,230. Experts say that its prices will go lower than $1,000 per ounce next year, but who knows? Unpredictable events like the Russia-Ukraine turmoil and the Middle Eastern conflict can lead gold prices up again so there’s no better time to invest in the precious yellow metal than now.
Over the long-term there is the potential for limited losses in gold investing. Even if its prices depreciate, it can still be used in times of uncertainty. If it’s sold at the right time, it can even make an investor extremely wealthy. Historical data shows that a $10,000 gold investment in 2001 would’ve grown to $62,484 in 2012 – a 524% appreciation.
Tags: investing advice, investing in gold
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on Tuesday, October 14th, 2014 at 3:00 pm and is filed under Stocks.
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