Gold has held a significant allure for people throughout history. From being used as a currency in an era and considered as decorative jewelry to its application as an investment, gold has had concrete value throughout time.
Today, people are using gold for the purpose of investment. In fact, about 47% of the demand for gold came from investors in 2020. The reason why gold is the investment of choice for investors is that it protects their wealth during tough economic times and saves capital in the long run. In addition to long-term returns, gold also offers effective diversification and acts as a hedge against inflation for investors. Here is Noble Gold Review.
Moreover, since gold has a low correlation with other assets, it performs better than them during recessions and reduces the adverse effects of the stock market downturns. In fact, during the economic recessions of 2001 and 2008, gold offered positive returns as opposed to the S&P 500, which went negative, thus building the economic case for gold.
In 2020 when the world was undergoing economic turbulence, investors from all over the world took comfort in gold once again. This resulted in record inflows in gold ETFs, and as a result, gold delivered a 25% annual return. As the world enters the era of high inflation, things have become increasingly dynamic for gold due to three reasons:
- Lower interest rates mean the cost of holding gold will be reduced.
- Gold has always performed better when inflation is high.
- The price growth of gold has always aligned with the rise in the money supply. By tracking the M2 money supply, gold can help investors secure themselves against risks such as currency depreciation and high inflation in asset prices.
Therefore, you can tell that gold will outperform when real interest rates go down. It will protect its investors in times of economic downturns and unpredictability while protecting their wealth in the long term.
A Golden Investment to Preserve Your Wealth
Now that you know how gold holds its value even during times of uncertainty, you must consider investing in gold bars and gold bullion. Below are some more benefits that come with investing in gold.
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Diversification of Investment Portfolio
Investors are always looking for ways to reduce risk in their investments. One way to do so is by diversifying their portfolios. By adding gold to the mix of stocks and bonds, you can effectively diversify your portfolio. Gold has a negative correlation with the U.S. dollar and a comparatively low correlation with other asset classes. This allows you to diversify your investment portfolio.
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Long-Term Returns
As history tells, gold has kept its value in the long term. The annual return rate of gold between 2001 and 2020 averaged 11.2%. It performed better than other types of investments, bonds, and equities and offered long-term returns. Whenever the stock market crashes, investors turn to gold to secure their wealth.
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Gold Is Sustainable
Gold has remained sustainable throughout history. Whenever a disaster strikes and paper money and banks are no longer reliable, people turn to gold. It is the only material in the world that is 100% sustainable and reliable.
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A Hedge Against Inflation
Since the prices of gold are set in accordance with the U.S. dollar, gold gets expensive as the purchasing power of the dollar goes down. It acts as a hedge against inflation and the falling value of the U.S. dollar.
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Protection Against Deflation
Deflation is a period where prices decrease, the economy is in excess debt, and business activities slow down. During the Great Depression and deflation in the 1930s, the purchasing power of gold went up while the prices of other assets significantly dropped. This was a result of people hoarding gold and gold coins in order to hold cash. As a result, gold proved to protect people against deflation.
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Limited Supply
Most of the gold in the markets today comes from gold billions that are sold from central bank vaults all around the world. However, these sales greatly declined in 2008 as the production of gold became slower since 2000. And for a new gold mine to get into production, it takes 5 to 10 years. Since the supply of gold is limited and goes down due to a reduction in production from gold mines, its price goes up.
Gold Will Always Outshine
The value of gold will always remain high. It is an asset that remains reliable through the tests of time, economic downturns, and natural disasters. Its value will never rust. Therefore, the economic case for gold is really strong in the future, and it will always prove to be the ideal asset for investment.
Looking to Invest in Gold for the Future?
If you found this article helpful, be sure to share it forward with a friend who may be an avid investor in gold coins, gold bars, and gold bullion. This is sure to help give them insight into the transforming world of gold prices, supply, and demand.
You can even open up a precious metals retirement account such as a gold IRA or silver IRA. A Crypto IRA can also act as a hedge against inflation and is a great way to diversify your portfolio. However, for this, you need a professional and reliable service provider.
