As an investor you have an almost limitless choice of where to place your money and what degree of risk to accept.
There’s little doubt that modern technology has made it easier than ever to dabble in stocks and shares but despite this, investing in physical gold remains as popular as ever.
The boom in the price of gold in recent years has attracted more and more investors and although it may be one of the most traditional forms of wealth, its qualities are just as applicable in the modern market as it was during days of yore.
We take a look at just four of the reasons why an investment in gold could be the missing element from your own portfolio.
1) A hedge against inflation
Although gold no longer is linked to any currency system anywhere in the world, it continues to rise and fall in tandem with inflation.
As the cost of living increases so does the value of gold bullion.
There is every indication that the global economy is slowly starting to recover which of course is great news. And with the Federal Reserve in the US also indicating that it will start to scale back its stimulus programme, gold is likely to be less in demand, especially since with lower stimulus inflation is less of a worry.
However, with the US still facing a debt ceiling problem, and future fiscal policy in the balance, the appetite for gold is likely to remain unchanged as the dollar could struggle to find its feet.
But whatever the current state of the global economy, gold will remain the quintessential go-to for all investors both to hedge against the risk of inflation and for shelter during rocky financial times.
2) Growing demand
Gold is unquestionably one of the most enduring symbols of wealth having been used for centuries and in the modern age, still playing a central role.
Gold coins, bullion and other physical assets such as jewellery remain in as much demand as ever and in some countries around the world, such as China, the appetite to purchase the precious yellow metal is climbing even higher.
New laws have been passed in China which will permit banks to sell gold bars to private customers, a transaction which up until now had been illegal.
Yet it’s not just the demand for investment-grade gold which is continuing to rise; its use in a number of different objects is also pushing up demand…and consequently the price.
Gold has countless different medicinal uses, both orally and intravenously, and its inclusion in treatments continues to grow. It also is used in the field of technology, particularly electronics because of its superior conductive properties.
Developing nations such as India are only just starting to have a presence in these sectors and demand for gold is high in order for those nations to be able to compete.
It is these functions and uses which renders gold such a valuable commodity and is one of the fundamental reasons why its price is continuing to climb overall.
3) A tangible asset
One of the differences between gold and the foreign currency market is that the latter has no real intrinsic value. Currencies are no longer backed by gold or other precious commodities and instead of merely pieces of paper whose value is what the government decrees.
This rather fragile system has led many investors to seek a more tangible asset for their portfolio, leading them to put money in physical gold. The main benefit that this has is there is no risk of the asset collapsing in value – unlike a fiat monetary system – and gold will always have its own intrinsic value, albeit one which may fluctuate in price.
4) Remain diverse
Any successful investor will tell you that the secret to earning money is to ensure that your portfolio is diverse and flexible; gold bullion can be the key to providing you with this.
Physical gold has a high degree of liquidity because of the extreme demand for it all over the world, whether it is coins, bars or bullion in general.
Many investors dabble in stocks and shares but bullion can provide a means of hedging against a falling market, as well as adding a layer of diversity to your portfolio. Most stocks, bonds and other paper investments have some degree of relation, leaving them all exposed to rises and falls in the market in the same way. Gold often has an inverse reaction, allowing you to reduce your risk.
Conclusion
Gold bullion is a great way to protect your money and provides the opportunity to invest in an asset which has an infallible intrinsic value. The above reasons offer just four explanations about why gold is so popular, and why so many investors will continue to choose it in the future. Will you be one of them?