Reasons Investing In Gold Can Be A Good Idea

Throughout time, gold has continued to be a respected commodity across the globe because of its scarcity — which has given it value. Further, gold has been utilized in many forms ranging from jewelry to currency, and even the backing for banking systems. Additionally, individuals have used gold as an investment opportunity as it has historically been a reliable form of storing — or building — wealth due to its previously mentioned scarcity. Moreover, many find gold to be a great option for diversifying their portfolios. As such, here are a few reasons you might want to consider investing in gold.

Gold Could Be Better Than Money:

While we do not generally carry gold around in our purses or wallets and use it to make daily purchases, some consider gold’s ability to hold value superior to any currency that exists. Correspondingly, gold has been used for this purpose for significantly longer than any currency system that we are familiar with in the modern day. In fact, it is conservatively estimated that gold has been used to store value for 3,000 years, while the British Pound, one of the world’s oldest recorded currencies, has been in circulation for roughly 1,200 years. Clearly, gold has stood the test of time, so far.

Inflation & Deflation:

Historically, gold has acted as a great hedge against inflation. This is because the price of gold tends to rise while the cost of living increases. For instance, over the past half-century, the prices of gold have increased drastically while the stock market crashed during high-inflation years. Interestingly, gold also seems to have advantages during deflationary periods as well. For reference, a deflationary period is a moment in time when prices decrease and business activity tends to slow while the economy is troubled by excessive debt. During those times, though, the relative purchasing power of gold has tended to increase while prices decreased considerably.

Demand is Increasing:

Over the past several years, emerging market economies — whose wealth has been growing — have had an increased demand for gold. For instance, as China’s economy has continued to grow, gold has remained a popular form of saving wealth. Consequently, the demand for gold has been steady. Furthermore, demand among investors has been increasing too. This is partially due to their efforts to diversify their portfolios, however, the growth of exchange-traded funds (ETFs) and other investment vehicles have also made an impact. For example, SPDR Gold Trust has become one of the largest ETFs in the United States. Likewise, it has also become one of the world’s largest holders of gold after only four years following its launch.

Ultimately, considering gold as part of your portfolio diversification strategy could be a great choice for you because of its price responses that differ from other investment options — such as equities (stocks). Similarly, while gold can be volatile in the short term, historically, it has continued to maintain its value (and grow) over the long term. Of course, however, investment decisions should be made based on your own research and it might be beneficial to do further due diligence regarding the possibility of investing in gold or other precious metals!