The current global situation is as unpredictable as ever. With the pandemic affecting the global economic condition and impacting everyone’s livelihood, people are looking for safe investments to make. While taking informed risks while investing can result in high returns, there is also an equally likely chance of huge losses.
In this current economic situation, predictably, people are leaning towards safer investments that are highly likely to guarantee high returns. And what better commodity to invest in for this than gold.
Here are some of the top reasons why you should consider investing in gold:
The metal has preserved its value over the ages
The precious metal has remained precious over the course of many, many years and through all kinds of economic conditions. While the value of the paper currency can appreciate and depreciate, the value of the metal tends to remain at a constant value regardless of financial and geopolitical uncertainty. One possible explanation for this may be the shared opinion of people that precious metal is one of the most stable assets to possess, driving demand for it. This demand, in turn, causes a steep rise in the commodity’s price if there is instability in the global market. The stability of this asset is evident in this table of returns of precious metals over many years compared to that of other common assets in Australia put together by ABC Bullion.
The perfect demand and supply recipe for sharp hikes in prices
It is no secret that less of the precious metal is surfacing from mines over the recent years, and the quantity is expected to decline in the future slowly. With production in existing mines decreasing and considering that it takes a minimum of five years to facilitate production from a new mine, the metal’s supply is dropping while the demand for it is as high as ever and is only expected to climb in the future. Therefore, just as a limited edition Lady Dior handbag would sell out faster than the other pieces since people place a value on its restricted availability, the same rule applies to the precious metal, shielding its prices from dropping significantly anytime shortly.
It can act as armour to protect from the effects of inflation and deflation
During times of inflation, the value of a currency can drop fast – this means all your cash investments can depreciate. However, the precious metal does not meet the same fate: the metal often outperforms the inflation rate, which can act as a great hedge against inflation. This means the value of your investments in physical gold may remain the same despite the inflation or may even see a rise.
Note: A hedge is an investment made to reduce the risk of large fluctuations in the prices of an asset.
Similarly, when prices fall during a depression, the constant demand for the precious metal like platinum and gold, owing to it being a safe way to store wealth, keeps its prices from falling.
It also helps to keep in mind that investing in physical metal rather than buying jewellery can be more advantageous, especially if you don’t plan to use the jewellery often. This is because jewellery comes with irrecoverable making charges along with the price of the metal itself. So, overall, the yellow metal is a great commodity to invest in and one you might want to consider investing in yourself strongly.
