You can invest in physical gold or gold exchange traded funds. Investors have tons of options when it comes to investing in this metal and trading gold bullion. However, many people are not aware of why they should even bother to invest in gold. People typically tend to assume that gold is a relic of the past and therefore no longer holds the monetary value that it once did anymore. Here is why gold is a good option to consider when reviewing your options for investment.
Why Gold is Imperative for the Thriving Modern Economy
Gold has successfully preserved wealth over hundreds of generations. Paper denominated currencies have not. Sure gold is not the forerunner of every transaction we make in our routine lives, but as far as the global economy goes, gold is a big deal. Don’t take our word for it – look up the balance sheets of significant financial organizations like the IMF. Right now, these places are responsible for one fifth of the world’s supply above ground.
Gold is Safe
Tensions anywhere in the world can rattle the modern economic environment. This is one reason why investors look towards gold as their safe haven during these times. History is filled with political coups, collapsing empires, and collapsing currencies. During such times, people who held on to gold were the only ones able to protect their wealth, and even use gold to escape the turmoil. Similarly during news of uncertainty investors are seen buying gold as a safe option.
There is More Demand than the Supply of Gold
Over the years gold has meant more to people than just another investment. Since the dawn of time, gold has worked as status symbol. Gold is just another metal the supply of which has yet to meet the demand. One of the reasons this is happening is because this metal gets used in products that are never recycled and therefore gold is being lost.
Investing in Gold Means You Are Diversifying
Gold is a diversifying investment. It does not matter if you are worried about a declining currency, inflation, etc, gold has always served as an investment which adds up to a diversifying element in one’s portfolio.
Understanding Gold and Paper Gold
The price of gold is set through trading in gold derivative contracts. All of these are covered by physical metal. In April 2016, the gold market hit a record slump. Two months worth of the entire world’s production sold out in the market. This was all cash equivalent of gold. When a market is struggling, the value of proxies in gold is traded and can shift at a great pace without there being any significant link between the supply and demand of gold. Fortunately, people considering the idea of investing in gold should not be fazed by this. These shifts may seem extreme but are short term, whereas gold investments are inherently long term.