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Top 5 Reasons to Invest In Gold

Discussion in 'Forex Discussions' started by painofhell, Jul 14, 2016.

  1. painofhell

    painofhell Content Contributor

    Jun 24, 2015
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    Besides being in limited supply, gold is indestructible and throughout the centuries gold has been an asset of perceived value even in times of significant market weakness (economic turmoil), civil commotion and war. On the other hand, gold cannot be manufactured in the way governments print currencies. Today, more countries, investors, central banks and other financial institutions are choosing to buy physical gold. Therefore, it is vital to understand the main reasons why you should buy gold.

    1. Diversification
    One of the most reliable forms of protection against market risk is simply having a diversified portfolio. Therefore asset allocation is a critical aspect of your investment strategy. However, most investors think they have diversified portfolios but they primarily contain various traditional assets such as bonds, stocks and cash. Although gold has strong returns, the fact that it is not directly correlated with traditional assets is its most important contribution to your portfolio. Moreover, diversification is a reliable component of minimizing risk and reaching long-term financial goals.

    Absolutely all successful investors use a mix of long and short-term investments in order to increase the profits that they can gain while minimizing the risks that they are faced with. Gold is one of the best possible long-term investments due to the constant increase in value and the really low risk that appears.

    2. Geopolitical uncertainty
    Gold retains its value both in times of financial uncertainty and geopolitical uncertainty. Gold is also known as the crisis commodity because most people flee to its relative value safety when tensions rise. During such times, gold bars often outperform other investments. Its price tends to rise most when the government faces low confidence. It is a paradox that has helped many to deal with unexpected investment problems caused by problems affecting the economy of the country they live or invest in.

    3. Currency debasement
    Today, most governments are constantly inflating and devaluing the purchasing power of their respective fiat currencies to both boost exports and international trade and to finance their social program liabilities and nominal debts more easily. For instance, retirees may receive the promised social security checks, but there is no guarantee on how many goods and services the checks can actually purchase. You are not faced with such a debasement when you look at gold since it is not directly controlled by governments. You can be sure that your country’s government will try to control the currency but gold is basically a global asset.

    4. Increasing demand
    The increased wealth of most emerging markets has boosted the demand for gold. Moreover, in most of these markets, gold is deeply intertwined into their cultures. For instance, India is a major gold consuming country where gold has various uses including jewelry. On the other hand, the Indian wedding session which is usually in October is the time that sees the highest demand for gold globally. The demand for gold in China has been quite steadfast mainly because gold is their traditional form of saving. Therefore, gold is simply increasing in popularity and prominent developing countries are expanding their reserves of this precious metal. For instance, China has already established relaxed control and a National Gold Exchange over the asset. Therefore, the demand for gold is expected to rise sharply in the next few years.

    Demand for gold is also growing among investors because most of them are beginning to view gold as an investment class into which they should allocate funds. Central banks are also investing in select mining shares and physical gold as a way of protecting themselves against the falling dollar. By swapping paper currencies for physical gold, central banks and governments are admitting that gold is truly superior. The bank is the best example of an institution that only thinks about long-term investments and this focus put on a precious metal is a clear sign that smart investors are focused on gold.

    5. Gold is a reliable form of protection against inflation
    Inflation happens due to a rise in the value of goods and services. Therefore, a unit of the currency buys fewer commodities and services as a result of the price hike. A drop in currency value can also be a result of governments printing too much money. However, gold has proven to be a unique asset because it is independent from any form of administration. The purchasing power of gold has proven to be quite stable over centuries all around the globe. All currencies including the Dollar and Euro are fiat currencies. This basically means that they do not represent anything physical but are worthy because of the decrees and laws of the country where the currency is used. Acceleration in global money supply is very gold friendly.
  2. Sharon Higgins

    Sharon Higgins New Member

    Oct 29, 2014
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    There is no question that Gold often is safety bet for us, but it’s also something that can create issues in terms of risk, so that’s why we just got to make sure we handle things well and don’t blindly enter into trades regarding Gold, we just need to make sure we find out right entry since that’s how we will be able to perform better and would lead into profitable results. I usually follow market news, so that helps me decide for things better, I get excellent support through OctaFX broker with their epic daily market news and analysis service, it’s straight forward yet seriously beneficial and effective for figuring out market situation, so that really makes me comfortable and relaxed with things.

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