Why Invest in Gold?
Gold. The precious metal which has captivated humanity for millennia, as a constant symbol of wealth and stability, gracing kings, and financing empires. Amidst the volatility of global financial markets and uncertainties of inflation, interest rates and currency fluctuations, gold continues to demonstrate its resilience as an enduring store of value, portfolio diversification tool and hedge against macroeconomic uncertainty.
Gold’s scarcity is a key factor underpinning its appeal. Fiat currencies are subject to the discretion of central banks’ monetary supply and policies like quantitative easing. Gold, however, is subject to the limitations of a finite supply and a laborious mining, extraction, and refining process. This inherent constraint on supply against a consistent global demand, contributes to gold’s enduring value.
Three Reasons to Invest in Gold
Safe Haven
Gold is a safe haven asset – particularly during periods of geopolitical unrest, economic uncertainty, or global crises. Gold’s resilience as a store of value stems from its inherent scarcity and as a tangible asset. Across historical periods of market volatility and currency devaluation, the demand for gold surges as investors seek its stability against global uncertainties.
Hedge Against Inflation
Gold has historically had a positive correlation with inflation and tends to perform well during periods of high inflation. Whilst it is not a perfect hedge, gold can still serve as a buffer and as a means to preserve purchasing power as the value of fiat erodes during inflationary periods.
Diversification Powerhouse
Gold has historically shown a low or negative correlation against stocks and bonds and is a good hedge against equity and bond market volatility. Gold acts as a diversification tool for greater portfolio resilience, spreading risk and enhancing long-term returns.
Investing in Gold
Investing in gold can take various forms:
- Physical ownership through bullion or jewellery;
- Gold exchange-traded funds (ETFs);
- Gold mining stocks;
- Bank issued depository certificates of gold;
- Gold futures and options; and
- Gold-backed cryptocurrency tokens.
Each of these avenues suit a range of preferences, risk tolerance, and investment objectives.
Final Thoughts
The allure of gold as an investment asset, is rooted in its intrinsic scarcity – giving it an enduring status as a store of value and a safe haven asset, a hedge against inflation and economic uncertainty, and a tool for portfolio diversification.
For those interested to include gold as part of their portfolios, Gold Tokens are now listed on the SDAX Exchange. These Gold Tokens are securitised, issued by an independent trust and backed by physical gold bullion held at Freeport vaults in Singapore.
Visit https://www.sdax.co/gold/ to find out more.
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