Gold continues to be a renowned investment for ages. Its rich history and value are respected across the globe. This is why more and more people are interested in investing in gold.
With the opportunities available for investors, there’s no doubt that gold is a good investment. From virtual trading to physical gold, there are many options you can choose from. However, it’s wise to know the basics of gold investment first before you decide to dive in.
Fortunately, whether you’re a seasoned investor or just getting started in investing in gold, you can depend on a gold investing hub that can provide the resources or strategies you need to invest. If you have some hesitations about investing in gold, below are some of the reasons why you should:
- Gold Has Lower Volatility
Unlike the majority of commodities, gold has lower volatility. Most commodities have returns, which usually move in the opposite direction of the stock market. Aside from that, commodities are a common inflation hedge since the prices often increase once inflation goes up. Gold prices, on the other hand, have performed better on average.
Commodities, as a whole, are very volatile. Some unpredictable factors, such as natural disasters, weather, and political instability can drive big short-term changes in demand and supply. If you’re a short-term investor, gold prices tend to be volatile because the prices always go up and down. But gold can be the most stable commodity investment when you use the right strategies.
All in all, gold demand is constant. Jewelry that accounts for about 50% of its use, tends to be a stable source of demand even if it drops during the pandemic. Also, since it’s hard to develop and discover a gold source, mining activities don’t respond easily to price fluctuations, so the supply often holds steadily.
- Negative Or Low Real Rates
Some investors always find high-interest rates to protect their buying power. However, the current environment calls for a low-interest rate. Across the globe, the rates will remain low for quite some time. This results in a situation of low or negative real interest rates.
On the other hand, investors may find gold investment a great choice. This is especially true for some investors who want to protect their buying power. The reason behind it is that they find gold as a good investment option given that it serves as a hedge against inflation.
- Gold Stock Opportunities
One of the reasons why you should invest in gold in 2021 is the gold stock opportunities you can enjoy. Basically, the values of the gold stocks are partially reflected by the movements of gold’s price. But gold stocks may maintain their profitability even when the cost of gold is low. Also, most gold mining companies pay strong dividends that can help offer further incentives for investors to purchase gold stocks rather than gold.
- Gold Can Diversify Your Investment Portfolio
Gold might be the most viable alternative among other investments. Although investment advisers and portfolio managers often recommend a mix of bonds and stocks, the reality is gold can be a better option due to some factors.
For instance, bond prices increase on declining interest rates. However, since stocks often compete with fixed-income investments, the drop in the interest rates is seen as bullish for the stocks.
Not only are stock returns more competitive than other types of fixed-income investments, but low-interest rates can also mean companies may borrow at low costs. The result is both bonds and stocks will increase at the same time. However, when the interest rates are high, the bonds and stocks are hurt so badly.
Often, gold moves independently of traditional investments like bonds and stocks. As mentioned above, it’s common during times of crisis. While bonds and stocks can cause declines in value on that instability, gold frequently thrives on it. In terms of gold, a small position may offset the reduction in the traditional asset prices.
- Gold Is A Safe Haven
Traditional assets, such as bonds and stocks, thrive on stability. Such include financial, economic, political, and geopolitical stability. But they tend to be more volatile when things are uncertain, especially when it comes to geopolitical aspects. This may be due to the geopolitical events that usually take place outside the states and beyond the immediate control of America.
On the contrary, gold as an investment thrives when things are unstable, particularly if it’s geopolitical. Typically, it tends to rise during times when threats of war or commodity interruptions rear their heads. It’s also worth noting that the cost of gold has risen since the pandemic. Even in 2021, gold will continue to be a safe haven for many investors.
With the above reasons in mind, gold is no doubt a great investment asset to have, especially if you’re aiming for a well-diversified investment portfolio. When it comes to the commodity markets, gold boasts the highest liquidity and has increased in value over time. So, if you’re looking for a good investment, you might want to try gold as one of your options.