History has proven time and time again the resilience of gold as the most valued commodity. To better understand the true value of gold and why you should invest in it we will walk you through the 5 reasons why you should invest in gold.
Let’s face it, we live with uncertainty every day. While some things are in your control, the geopolitical climate, unfortunately, is not. Though broader financial systems and geopolitical uncertainty are out of your control, you can still prepare for them. Historically, investing in precious materials like gold is a way to transfer the value of your current economic currency into a universally traded good. Sometimes gold is even referred to as the “crisis commodity.” This is because people invest in it for its relative financial safety when political tensions rise. Even during crises in recent decades, gold has outperformed many other assets. If history has anything to teach us, it’s that when a government loses the confidence of its people, gold prices often rise.
Production from gold mines has been declining since 2000 and it can take almost a decade to bring a new mine into production. Furthermore, since the 1990s, most gold bullion sales have come from global, central, bank vaults. According to Simon Constable in a 2018 Forbes article, central banks have started purchasing gold in response to concerns about the worth of the american dollar. These two factors have been creating a supply constraint on the market. The market price of gold will rise as we see the impact of these supply constraints taking effect, causing gold to be scarce and therefore more valuable.
Quantitative easing and risky federal reserve decisions made between 1998 and 2008 have caused the U.S. dollar to lose a significant amount of value in comparison to other national currencies. Even with this drop, the U.S. dollar remains the world’s foremost reserve currency. Transferring the value of this currency (while it’s still valued higher than other currencies) into gold, which can be traded and tends to increase in value, makes for a smart investment. People need a financial system and currency they can rely on. Many investment professionals are concerned about the structural weakness of the U.S. dollar in the mid-long term, the next best thing people seek for stability is gold.
Today, almost every bank or investment system digitally store their records of holdings and transactions. Gold, however, can be stored in the comfort of your own personal safe or at a security deposit box near your home. Technology has encouraged new investors to participate in trading but it is also limited by the ability to access and verify assets. Even a certificate validating the purchase of a stock or a bond isn’t the same as having the assets on-hand when needed and changes with the value of that stock. Choosing gold as an investment gives you the ability to store it yourself and liquidate it immediately if you need to.
If you’re an avid traveler, you’ve probably noticed that other countries don’t accept U.S. dollars outright. Using a credit card or bank card abroad can be dangerous and some come with costly fees. Most stores obviously won’t accept a bar of gold as payment. However, with regard to trading gold for other countries’ currency, it is universally accepted for its value and can provide you with a highly liquid asset should the need arise.
Gold is in jewelry, cell phones, and some of the best performing investment portfolios out there. From its remarkable luster to the stability it maintains even in the most difficult international times, gold has shown its merit as a reliable investment everyone can get on board with.