Gold is a precious metal that has been held by people since ancient times and its rich heritage and history cannot be ignored, even today; many gold coins dating back to 800 BC have been discovered. Investing in gold bullion is an ideal way to diversify your portfolio and increase your holdings, especially since paper-based currency is losing its credibility. There are many reasons to start investing in gold bullion. Here are 10 of them:
1. It Has a Rich History
As mentioned earlier, gold has been an ideal choice for investors since ages. Unlike other commodities like coins or fiat currency, gold holds its own weight in worth and its value is maintained over a long-term.
2. Protects from Drop in Currency Value
Gold has a tendency to protect its holder from changes in the value of the national currency. For example, from 1998 to 2008, the value of the U.S. dollar fell and many people moved towards gold for financial security. As a result, the price of gold had tripled.
3. Great When the Cost of Living Rises
When inflation occurs, nothing can protect you as effectively as gold. This is because when the living costs increase, the price of gold increases as well. On the other hand, stock markets decline.
4. Suitable When the Economy Slows Down
Sometimes, the economy comes under a pressure and business activities slow down due to excessive debts. Consequently, the prices decrease, but the price of gold increases. In other words, investors are protected from experiencing a loss from their assets.
5. Stable during Political Instability
When tensions are on the rise due to uncertain politics or when the threat of war looms, the value of gold is retained. Most people will turn towards their gold investments for financial security. Gold is also known as a ‘crisis commodity’.
6. The Price is Affected by the Supply
The production of gold has seen a major decline in recent years; according to a report, the annual output of gold decreased from 2573 to 2444 metric tonnes over a period of 7 years (2000 to 2007). However, the price of gold increases when the supply is restrained.
7. More Demand
Due to many emerging economic markets in the world, the demand for gold has increased globally; this is also true among investors. Many have realised the importance of allocating funds to commodities like gold.
8. It Diversifies Your Portfolio
Portfolio diversification is the key to success as it lowers risk and volatility. One of the methods of diversifying your portfolio is by investing in a commodity that is not correlated with another; gold is one such investment which has a negative correlation to bonds, stocks, etc.
9. They Can Be Liquefied Easily
Gold bullion bars or coins are one investment that is highly liquefiable; you can sell it easily whenever you are in need of cash.
10. Highly Portable
In other words, gold bullion can be stored and carried conveniently during tough times. Normally, bullion coins or bars are stored in vaults or banks, but in times of crisis, you can carry them in a bag or briefcase.