Why Invest in Gold?
WHAT ARE THE BENEFITS OF INVESTING IN GOLD?
Throughout history, people have been investing in gold as a potential means of hedging their losses during turbulent or unsafe economic times. Even for today’s investors, the use of gold investments for this purpose is still largely appealing, and likewise, a large number of other factors make investments in gold an attractive growth vehicle.
USING GOLD AS AN INVESTMENT SAFE HAVEN
During troubled or volatile economic times, much like those facing investors today, many savvy investors will look to protect their wealth, capital, and other assets by placing this money into areas considered safe or less risky. Throughout modern investment history, gold has consistently been one of these items due to the lack of default risk in the event a financial instrument issuer refuses pay. Likewise, gold investments maintain a level of wealth stability during times where other investment vehicle may teeter in the ranks of reckless and radically changing at best during turbulent times.
DIVERSIFYING PORTFOLIOS USING GOLD INVESTING
For the typical investor’s portfolio, this combination of wealth and assets in typically comprised of stocks and bonds. Most financial analysts agree, however, that diversification of investment portfolios is a smart move for almost every investor in protecting against detrimental market fluctuations that will inevitably occur. Likewise, such as the case with gold prices, other assets may increase in value in the face of severe decreases in other assets. Hence, diversification of investment portfolios is essential for those individuals wishing to maintain their wealth over the years to come.
USING GOLD INVESTING AS A HEDGE AGAINST INFLATIONARY PERIODS
The securities market consists of constantly changing terms; however, gold consistently has retained its purchasing power in light of all these financial windfalls and downfalls. Even in the face of rising prices and cost of goods, gold has maintained an unparalleled level of purchasing power and value for gold investors. As a result, gold is often purchased by investors to avoid inflationary losses and fluctuations.
GOLD INVESTING AND HEDGING AGAINST THE DOLLAR
Through the realm of investing, many financial analysts have consistently recommended utilizing gold investing as a means of hedging against the fluctuations in the U.S. dollar’s value. Falls in the dollar typically will produce a converse rise in the value of gold and gold investments. During times of a weak dollar, the decision to hold assets in gold investments is a wise one to say the least.
MANAGING RISK THROUGH GOLD INVESTING
Over the course of history, gold investments, when compared to other investment commodities and equity indices, has proven to be marginally much more stable than most. Having gold in an investment portfolio greatly reduces the level of risk an individual investor will be exposing themselves to, as well as increasing their potential expected returns in downtrend economies. Likewise, the risk factors affecting gold price greatly differ than those incurring risk in all other assets.
SUPPLY AND DEMAND OF GOLD GLOBALLY
Like all other commodities, gold price fluctuates most basically on a level of supply and demand. The production of new gold supply is currently relatively inelastic in spite of rising gold prices and demand for gold. The sustained growth of gold, in turn, will only continue due to the consistent level of increasing demand and the inelastic production of new supply. The foundations for a positive outlook regarding gold investing is better than ever before today.
GOLD PRICE VERSUS STOCKS
Though stocks and gold bullion are completely different asset classifications, the performance of both items are often compared. Gold retains a store value, while stocks return profits to investors through a return on value. Typically speaking, stocks and bonds will only perform well in stable economic and political times, while gold maintains even higher levels of performance amidst these tumultuous time periods. In a given example, the investment community amused itself with the proposed questions of gold versus Google. At the time the question was posed, both the one ounce price of gold and one share of Google had a value of around $700 each in November of 2005. As of December 2008, the closing price of one share of Google neared $292, while the closing price of one ounce of gold bullion was valued at over $800. Given the political uncertainty, economic downtrend, and financial crisis facing the United States and other nations, the hedging of losses, and in turn, returns on investments, from gold have continually outperformed stocks and bonds of all kinds
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