Gold has been used as the medium of exchange by humans for centuries. It is one of the most precious metals that hold immense value, monetarily and sentimentally. In various places, especially in Asia, gold is also considered a status symbol. Not only that, the prices of gold have been on ever-increasing spurge since the last few decades and are predicted only to rise further. Hence, the gold market makes it an incredible investment opportunity for investors who wish to make money with the rising gold prices.
Why should you invest in gold?
Let’s begin with some facts. The gold market is currently valued at $7.3 trillion and is traded at $1813.50 per ounce. It has been witnessing a positive change for quite some time now, and even the global pandemic did not affect the pricing much. When you invest in gold, you protect yourself against rising inflation. This is because if a country’s inflation is to increase, one of the first commodities that will be affected is the yellow metal, gold.
When you invest a certain amount in the metal, as and when prices in the country increase, the price of your investment also increases. This puts you in a profitable position and protects you against any cash crunch in the future, as gold is also known to be very liquid. It also diversifies your portfolio and intends to help it do well during economic downturns or rising inflation.
As mentioned earlier, gold is a status symbol. Gold’s safe-haven status helps you compensate for the losses you incur with your falling portfolio, especially during times of economic downturn and similar instabilities. For as far as we can remember, gold prices have only gone up irrespective of the turbulence. Even when it did fall to an extent close to negligible, it did not make gold investors suffer at all.
Also, gold’s prices are not correlated to any other existing security. This makes it an independent security that only relies on itself and not any other external factors. It acts as a source of income that does not move in sync with the stock, commodity, or forex market and is not disturbed by the same. Hence, investing in gold is one of the best decisions you can make to diversify your portfolio incredibly.
How to invest in gold?
Besides stocking up gold jewellery, there are a few other ways in which you can start investing in gold. The first way is to purchase physical gold bars and coins from a certified jeweller. You can also purchase fold futures contracts or CFDs or invest in gold exchange-traded funds. If you do not directly want to invest in gold, you can invest in gold-related stocks, like gold miners, big jewel houses, and more.
Investing in gold through all these mediums comes with its fair share of pros and cons. If you buy the physical metal, it is unarguably the best way to invest in gold as it syncs the best with the current gold prices and is genuinely liquid. The only con is that it will require storage space and absolute security to keep the physical metal safe and sound.
Future contracts give you the advantage of leverage. This means you do not have to invest in the actual cost of gold. Instead, you only pay a small amount to hold the contract and can sell it when the gold prices go up, realising real profits from this action. However, the disadvantage here is that future contracts always come with an expiry date. So that binds you to sell off the gold on a pre-decided day, irrespective of the prevailing prices.
Gold ETF’s, on the other hand, are extremely easy to access and trade. However, it does not offer the leverage that futures contracts do. Last but not least, you can follow the indirect path to invest in gold by investing in gold miner’s shares. Most miners pay a dividend to their shareholders, entitling you to a fixed amount every year. However, the disadvantage of investing in gold mining stocks is that they are highly volatile. The share prices fall quicker than gold prices themselves, making it a little risker when compared.
Final verdict
In our opinion, investing in gold is undoubtedly a profitable bet. There has hardly ever been a time when the gold prices fell or reap significant losses. And there is hardly a time we can remember when the gold market crashed. During the most substantial recessions and times of trouble, the gold prices have stayed tight in their place, ensuring that anything can break but the precious yellow metal. It is an excellent hedge against inflation and protects your portfolio through incredible diversification. All in all, if the investment opportunity suits you, it is best advised to explore this area of investments as well!
