Gold is a universally respected metal, valued for its beautiful colour, strength, and shine, and treasured due to limited availability. Gold possesses its own rich history, and has been an integral part of different cultures since the establishment of dynasties. Coins having gold traces have been extracted from as early as 800 B.C., while the earliest pure gold coins have been discovered from 500 B.C. King Croesus of Lydia’s reign.
Since the early civilizations, people, especially kings and royalties, invested in gold for their obvious monetary value and a person’s richness was calculated based on the gold that he had. Gold is the single metal whose value has maintained and consistently increased over the centuries. Many individuals, especially the Indians, keep it as security against difficult economic times. It is a liquid asset and seen both as an investment and a luxury. Mentioned below are ten important reasons that tell you why you should invest in gold.
1. Inflation Proof
Every economy in the world proceeds through the stages of inflation and deflation. Inflation is a time when the original money value goes down. Hence, if you are hoarding a large amount of cash reserves then the value would invariably depreciate and weaken your purchasing power. Hence, it is intelligent to invest your cash reserves in this precious yellow metal to make yourself inflation proof. History has repeatedly shown gold to outperform the changing rate of inflation and hence, the risk of money devaluation reduces if your major investments have been in gold.
2. Highly Liquid
Gold is a highly liquid asset that can be easily bought and sold and carried in your purse to all national and international travels. Almost all jewelers in different corners of the world would recognize the worth of gold and instantly buy it from you in exchange of cash money. The metal can also be sold to anyone without any paperwork or official transcript. Hence, you can sell gold to an online dealer, a private party, at a pawn shop, or even a coin shop. Our history books have shown gold to be an exchangeable commodity that kings and merchants exchanged for cash and other essential supplies. The whole process of selling gold is also much quicker as compared to the sale of other assets such as stock, paintings or other properties, which usually takes three or more days for settlement. For commodities like painting, it usually gets difficult to meet the right buyer since we have very few art collectors. Hence it also gets difficult to get a good price on them. Gold does not suffer from any such constraints and can be sold instantly with a wider selling option.
3. No Requirement for Specialized Knowledge
Investments usually need a specialized knowledge. If you are thinking of investing in stocks, then you would need to do stock market study or get your investing planner’s help to buy the right shares. If you are deciding to buy an expensive painting then you would require expert advice to distinguish a real painting from a fake one. Similarly, investing in diamonds necessitates an expert intervention. However, gold does not need any kind of specialized knowledge, equipment, training, or skill and a person can simply visit a reputed jeweller to make the desired investment.
4. Deflation Proof
Unlike inflation, deflation is a time when the price of commodities and goods go down. During this period, an economy suffers the burden of high debt. Although deflations are rare, they bring about financial losses and lowers the values of different assets like real estate, paintings, and stocks. However, even in this period, gold manages to keep its value and even soars high as people resort to it for investments. Thus, investing in gold helps you to tide through deflations.
5. Geopolitical Uncertainty
The value of gold remains unchanging not just during financial insecurity, but also in the era of geopolitical uncertainty. Gold is referred to as the “crisis commodity,” as individuals buy it during rising world tensions and usually gold is the only stable commodity in the market that hold on to its value.
6. Constraint on Supply
Gold suffers a constraint on supply, although its demand remains high. According to the law of the market, any good that has a reduced supply enjoys an elevated selling price. Since the 1990-decade, majority of gold available in the open marketplace has its source from the vaults of international central banks. The banks have slowed down on the gold bullion sale since 2008. Simultaneously, there have been a reduction of new gold production in the existing gold mines. Working on the productivity of any new gold mine could take five to ten years. Hence, the yellow metal is destined to stay a rare commodity and its price would always be high.
7. Escalating Demand
Gold is much popular amongst investors and its demand is escalating amongst the wealthy in the emergent economies. Chinese traditionally use gold bars as a traditional savings approach while Indians invest heavily into gold jewelleries and no weddings are complete without beautiful bridal gold ornaments. Investors are also steadily seeking out gold as a safe form of investment. The consistent high demand ensures a rise in its value.
8. Diversification of Portfolio
Investors typically seek diversification to keep their assets safe. The secret is to invest in ventures that do not relate to each other. Gold shares an inverse relation to the stock market and whenever one shows a profit, the value of other goes down. Hence, we find historical records where 1970s was a great year for gold but a poor one for stocks. Similarly, the 1980s and 1990s showed stocks doing strongly on the share market but gold faced a slump. The year 2008 again saw a substantial dip in stock prices but gold reigned supreme. Thus, an intelligent portfolio diversification uses a combination of gold, bonds and stocks for minimal risk and volatility.
9. Secure Investment
Gold is a form of secure investment and the owners never have to fear bankruptcy in their lives. Gold is not dependent on paper contracts, middlemen, or third party to make it a contractual agreement. Hence, gold is free from other people’s role or interferences and acts as a parachute to offer you a safe landing when things start going wrong in the economy or country. In its 3,000+ years of history, gold has managed to uphold its value and would never face a devaluation. Hence, anytime there is a crisis, it can be sold to fulfil immediate currency needs and bail out the owner.
10. Maintenance-free Asset
Gold is a maintenance-free asset that does not require any repair, or polishing up. It can easily be stored in a secured location for several centuries and still fetch a high monetary value if the need to sell arises. However, most of the other assets like painting or property requires regular maintenance which is an expensive and time-consuming affair. Hence, if you have money and desire a hassle-free investment, then you can simply invest in gold, keep it in a safe place, and forget all about it till a need to reinvestment arises.
11. Tax-free inheritance for the Next Generation
Gold is one of the easiest inheritances that you can leave behind for your loved ones. Gold can easily be gifted to the children without the need for paperwork or middlemen and children can use them in times of need. India has a culture of gifting gold to sons and daughters during marriage. As the price of gold continuously increases so you can make a habit of buying small amounts of gold at regular intervals so that when the time comes you can easily gift it to your children without needing to invest major amount of money. Gold is also a good investment for your children’s future and as it quality or market value does not decrease over the decades, hence, your children can use them anytime they want without losing on the money.
12. Easy for a Loan
Emergencies can happen anytime in our lives and having gold as investments prepare us for those times. It is not necessary to sell off your ornaments to fulfil the instance monetary needs for you can also get loans against the gold jewellery from banks and other lending institutions. Loans give you the option to pay off the debt and get the jewellery back once the money is available. Loans against gold can be obtained within a single working day. The banks also keep your gold safely in their vaults so that once you decide to pay off the borrowed amount, you will get back your precious metal in exactly the same condition which you had deposited. Since gold loans come in the secured loan category, hence the rate of interest on them is quite less in comparison to general loans.
Hence, gold is safe and secured investment that can be kept in the family for many generations, need no maintenance, tides through inflations and deflations, requires no specialized knowledge, could get you low interest loans, and are also easy to pass down as an inheritance.
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