Published on May 31st, 2014 | by Pete1
5 Reasons to Invest in Gold
It is in times of recession that investing in commodities such as gold and silver increases in popularity due to the fact the valuation of these commodities is not reliant on currency value.
We have looked into 5 reasons why investing in gold is worthwhile.
1. A valuable family heirloom
unlike assets such as property or shares whose valuation fluctuates greatly depending on the economic situations, the value gold tends to remain stable and allows for passing family wealth from one generation to another. That is why it constitutes a valuable family heirloom.
2. A safe haven in times of political uncertainty
gold is often labelled as the “crisis commodity” for its capacity to retain its value, even times of economic downturn and political uncertainty as its valuation does not rely on the currency market.
That is why current events such as the political crisis in the Ukraine, the deteriorating situation in the Middle East and North Korea’s nuclear ambitions are likely to trigger an increase in the price of gold.
the key to a diverse investment portfolio resides in finding investments whose valuation is not too closely linked. For example gold has always had a negative correlation to stocks and other financial assets such as property bonds and hedge funds.
A diverse investment portfolio which includes gold, stocks and bonds will therefore reduce exposure to the stock market’s volatile nature and will also mean that the investor will have a “safe haven” to fall back onto in case things turn sour on other markets.
4. A decrease in the supply of gold
the decrease in dearth exploration activity and the decline in mine supply has led to a drop in the amount of gold available. What’s more in recent years, most of the world’s supply in gold came from the sale of gold bullion from the vaults of central banks, however since 2008; this practice has been slowed down greatly due to the tension on currency markets as they seek to hold onto their stock of gold.
The combination of all these factors coupled with an increase in the demand for gold due to ever fluctuating currency and stock markets is likely to result in an increase in the value of gold.
5. Increase in demand
the demand for gold has been spurred by the incredible economic performance of emerging markets where investment in gold bullion is now on trend. This particularly true in India where the consumption of gold on the local market will impact the value of gold worldwide; this is particularly true in October when there is a hike in the value of gold due to it being the wedding season.
The increase in demand is also due to the rise in the use of gold in industrial sectors such as electronics. It is predicted that within the next few decades, the demand for appliances and technologies which require gold and silver from developing nations such as South Africa, Indonesia and Peru is set to increase dramatically.