Top 5 Reasons To Buy Gold In 2020
Gold has the advantages of uniform texture, easy division, small size, large value, non-perishable, and easy to preserve. It has the exclusive status of general equivalent with silver and has become an ideal currency material.
Marx once said: “Gold and silver are naturally not currency, but the currency is naturally gold and silver.” Gold itself is a commodity with use-value and value.
For centuries, gold has not only been seen as an asset passed down from generation to generation, but also an investment option.
Why choose gold?
When everyone is panicking because of the deep economic crisis, gold, this kind of long-term wealth storage with time-tested and good quality is the best choice for this period.
But even so, gold buyers in the early stages of the economic crisis may buy gold purely to protect their wealth, but they still hope to increase their assets at the same time, because they subconsciously predicted future market demand. This is the best investment option.
From a regional perspective, the gold grid has been fluctuating in the range of $11.949 – $12.053. For many people, the current gold price is too high to invest in because the return on investment at the moment may be meager.
However, the state of the market will not remain the same, but it forces people to question how to invest in gold and whether gold is worth investing in.
As an asset class, gold neither promises fixed income like fixed deposits nor does it have the ability to return like stocks or other market-linked investment tools.
However, it injects a sense of security and confidence into investors to deal with market uncertainty and financial crisis. Therefore, most financial advisers recommend that investors allocate at least 10% of gold in their investment portfolio.
Top Reasons to Invest in Gold
1. Gold provides protection against inflation and other market uncertainties
In times of inflation, investors fear stocks and debt securities, because at such times, these investment options may be more expensive than usual and may underperform. On the other hand, historically, gold has proven its value during periods of high inflation.
If you talk about returns, then the 10-year annualized rate of return for gold is much higher than the inflation rate.
2. Gold provides decent returns after risk adjustment
One of the main reasons most certified investment advisers recommend investors to include gold assets in their investment portfolios is that it helps reduce the overall risk of the investment portfolio while maximizing returns.
Through proper asset allocation, gold can offset any defects or risks in bond yields or stocks.
In view of the asynchronous movement of these three assets, namely debt, gold, and stocks, combining them in an appropriate ratio in the investment portfolio can help reduce overall volatility and risk.
For example, if the stock market falls, gold will prevail, thereby offsetting any downside risks and protecting overall interests.
3. Can gold protect the interests of investors in case a country’s currency depreciates sharply?
A country’s currency and gold interest rates are interrelated. For example, when the U.S. dollar or reserve currency depreciates, the price of gold will rise.
Therefore, when a country’s economy is hit by macroeconomic factors such as geopolitical tensions, gold can help reduce its impact.
In this case, gold has played a role in hedging currency depreciation and protecting the interests of investors.
4. During the financial crisis, does gold bring protection?
Many investors use gold during the financial crisis. Not only investors but even countries will use gold to escape the financial crisis.
For example, in the late 1990s, when India’s balance of payments situation deteriorated sharply, it had already obtained a loan of US$405 million from its country’s gold reserves.
When India was in huge financial trouble, gold began to rescue India. Similarly, those who invest in gold in any form will sell or pledge gold during the financial crisis.
5. Gold can help reduce risks while creating wealth
As an investment, gold can bring two major benefits to investors.
The first benefit is that it helps to reduce most of the market-related risks. As discussed earlier, it protects your interests from inflation, currency devaluation, etc.
The second benefit of gold is the creation of wealth. Even if there are no geopolitical tensions or economic crises, in the long run, it will help to bring you considerable returns to accumulate wealth.
In addition, gold also helps reduce the risks associated with other investment options, thereby preventing huge losses. For example, if there is a political shock, investing in gold will protect people from capital losses caused by stocks. Gold investment channels include physical gold, gold sovereign bonds, gold ETFs, and gold portfolio funds.
The classic investment in physical gold is considered a stable investment worldwide. Since the precious metal is traded in different forms from platelets to coins to gold bars, investment is also possible for small investors without any problems.
In contrast to securities, the coveted precious metal does not have to expect a complete loss of value even in difficult times of crisis. Therefore, gold is considered one of the safest investment options in terms of value retention.