For thousands of years, gold has been greatly respected across the globe, thanks to its rich history and value. People have continued to hold this precious metal for various reasons through the centuries. Today, people, and entire economies, have placed a lot of value on gold; thus, sustaining its worth.
If you have been wondering whether you should invest in gold, read on to find out some of the main reasons why you should seriously consider it.
Gold Has A History of Holding Its Value
Thanks to its unique physical properties, like the beautiful colour and resistance to corrosion, people have placed a lot of value on gold for thousands of years. Over the years, this precious metal has been seen to hold its value much better than many assets, including the most popular currencies.
As such, many people see gold as a great store of wealth. Moreover, since it holds its value better, many people also prefer to use this precious metal as a transfer of wealth from generation to generation.
Gold Is A Good Hedge Against Inflation
Over the years, during times of inflation, the value of gold has been seen to rise. This makes it a great hedge against inflation. Since gold is priced in terms of fiat currencies, just like other goods, its price rises with that of other goods as fiat currencies lose their purchasing power.
It is also worth noting that as the value of stock plunges during years of high inflation, the value of gold skyrockets. As such, whenever financial uncertainty looms, gold is seen as a great investment that not only holds its value well but also appreciates during times of inflation.
The Supply Of Gold Has Been Dwindling
As a general rule, any reduction in the supply of gold on the market leads to an increase in its value. Since 2000, the mining of gold has been on the decline. This combined with the fact that it takes nearly a decade to bring a new mine online, further limits the supply of gold on the market.
It is also worth noting that the sale of gold bullion by global central banks, the biggest suppliers since the 1900s, has been slowing down since 2008; thus, further reducing supply.
Demand Is Always Growing
The demand for gold has been on an upward trend thanks to increased wealth in emerging market economies in recent years. In countries like China and India, where gold enjoys huge cultural significance, demand has been growing steadily.
In China, the precious metal has been traditionally used for saving. In India, the 2nd largest market for the gold, precious metal is used in a variety of ways, including the creation of jewelry. In fact, global prices for gold are highest in October, the Indian wedding season!
There are many reasons to invest in gold. However, the most important one, for any investor, might be portfolio diversification. Most of the events that cause the value of paper assets, such as bonds, stocks and currencies, to decrease lead to an increase in the price of gold. Furthermore, even though its value fluctuates in the short term, gold always rebounds and holds its value quite well in the long term.
With all these factors in mind, it is easy to see why investors should seriously consider investing in gold.
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