Reasons Why You Should Invest In Gold
The best way to increase your income is through investing your money. Though investing is good, many people are faced with the challenge of deciding where to invest. If you are thinking of investing but you are not sure where to do so, this article will provide you with reasons why investing in gold is the best idea. Here are seven reasons why you should invest in gold.
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1. Gold has value
One of the reasons why you should invest in gold is because of its unquestionable worth. In fact, gold is the only form of money that has survived for over 5,000 years without losing its value. Therefore, investing in it is an excellent idea.
2. It is an excellent hedge against inflation
Gold is not affected negatively by inflation. This is because, even when the cost of living rises, the price of gold rises too. A good example of gold's ability to not be affected by inflation is the 2008 global economic crisis. Stock markets plunged, and people lost their money, but the price of gold soared. Those who had invested in gold made huge profits while others who had invested in other assets suffered huge losses.
3. Hedge against deflation
Deflation is a situation where business activity slows, prices decrease, and countries' economies experience high levels of debt. This situation was encountered in the great depression of the 1930s. Gold was among the few assets that were not affected by this depression. In fact, its price soared, and those who had invested in it made a lot of money.
4. High demand low supply
Gold is in very high demand, but it is also low in supply. For this reason, when you invest in it and finally decide to sell it, you will not lack interested buyers, and you will also make handsome profits.
5. Weakness of the U. S. Dollar
Another reason why you should invest in gold is the weakness of the U. S. dollar. Because the U. S. dollar is a major reserve currency, people tend to over-invest in gold when the dollar's value falls against other currencies. High demand for this asset causes its price to rise. A good example is between 1998 and 2008 where the price of gold nearly tripled because of the decline of the U. S. dollar's strength.
6. Diversification of investment portfolio
Another reason why you should invest in gold is to diversify your investment portfolio. A good investment practice is to invest in commodities that are not closely correlated to one another. Because the prices of gold, stocks and other financial instrument are negatively correlated, it is a good idea to invest in gold. Therefore, when the price of stocks falls, you will make profits from gold.
7. Geopolitical uncertainty
The price of gold is not negatively affected by geopolitical and financial uncertainty. People opt to invest in gold during these times because its price soars. Unlike other assets which are negatively affected by low confidence in governments, the price of gold rises instead.
There are plenty more reasons why you should invest in gold. These seven are among them.