From the rise of gold stocks to gold exchange-traded funds, there are numerous options for gold investors today. Throughout history metal has been seen to play major roles in the economies of different nations, but the question is; what is its purpose and why should an investor bother considering it as a viable option?
In any portfolio diversification is good, and when looking at those different assets gold has been known to offer a solid hedge against inflation. However regardless of whether you chose to invest in gold or not, it does pay to have several securities rather than holding onto just one stock. When there’s a boom in the stock market there’s possibility of gold prices falling, but alternatively when there’s a decline the royal metal regains its lustre. It’s advisable to add assets to your portfolio and not have them correlate with the stock exchange so that you have a stabilised influence when volatility strikes. More so, given that gold moves inversely to currency values, you get to diversify effectively.
Universally Desired Investment
Right now, the most preferred choice of investment is gold. Currently its prices are on a skyward trajectory, meaning that if you are a fan of wild rides, it’s the perfect time to invest. Many gold mining companies have reportedly done exemplary well since the start of 2016 and have seen prices rise in their stocks, with better results expected in 2017. This is unlike other commodities that have sadly suffered in the uncertain economic times. History has dictated that gold is one of the best and safest assets to invest in.
Liquid assets are easily converted into cold cash without the loss of substantial value in the conversion. Investments related to the bank such as money market accounts are some of the most liquid assets. Ideally, it is a measure of how fast, and easily the commodity can be converted into cash. In this case, gold is a highly liquid asset because of its high market demand. It means that many industries and individuals can afford to buy it. More so, aside from cash, the universality of gold is unparalleled. Unlike other commodities that CMC Markets has to offer, gold does not pay dividends until it sells.
When to Invest
The most appropriate time to invest in gold is when there is expected inflation that would; otherwise, force down the national currency value. You are better positioned to benefit from higher profits when you detect the drop. You can look at the leading indicators to know the future devaluation of your currency. When there is a demand for printing out more local currency, this is the perfect timing for an investment in gold. With a stable currency and low chances of inflation, the price of gold is likely to stagnate or drop, meaning that you should consider investing in it if there is demand from the jewellery and electronic markets. For the ordinary investor, a buy and hold investment strategy would work perfectly, and given that economies are cyclical, only buy when its prices are down.
While most other investments fail, gold can be profitable. In cases where you may worry about its devaluation or inflation, it might be necessary to add it to your portfolio. If your plan is to invest in gold for diversification purposes and you have the willingness to take a systematic approach, then the idea of investing in the asset is valid, and the future market could be yours. However, if your plan is to become a pure gold investor or you simply imagine the investment as a safeguard against losses, it would be advisable to put your money elsewhere.
It is vital to understand the particular gold investment you need carefully. For instance, how much will it cost you to insure the physical gold? Are there tax differences between gold mining and investing? These aspects count when it comes to profitability. It may be tempting to get carried away in gold investment, especially in a struggling economy, but you have to tread carefully. What you need to do before focusing on this investment is to diversify your portfolio.