There are many people who believe that investing in gold bars could be the best decision you would ever make. But, equally as many people have faced indecision between investing in gold bullion or stocks and bonds as a way of securing their future. Which is the best option to capitalize on?
The truth is you can capitalize on both of them. Both have upside potential.
So, is gold investing a venture the average person should entertain? For those who answer “Yes”, here are the four main reasons they site.
Why to Invest in Gold
1. The Unpredictability of the Dollar
Although the dollar is believed to be one of the world’s strongest currencies, it becomes hard to figure out when its value is likely to drop. An excellent example of such times was from 1998 and 2008 when gold prices hit $18,000 per ounce.
During this period, the dollar was relatively weak due to the trade deficit and increased money supply into the economy. Individuals who had stored their worth in currencies moved to the security of gold to redeem their portfolios. As a result, the value of gold nearly tripled. Investors who had a gold ira rollover made a large profit out of it.
This is why an average person looking for a long term investment strategy shouldn’t overlook the benefits of storing their savings in gold. You never know when fluctuation of the current currency would strike. Luckily, when such a time comes and you had saved your wealth wisely, you might end up opting for an early retirement because you have gained so much.
2. Supply Constraints
As a general rule of the demand and supply chain, when the demand for commodities goes up, the likelihood of their supply goes down. As a result, this leads to an increase in how much you would have to part with to get the same item. The less their is of an item, the more it is going to cost.
The same principle applies in the gold market. Between the year 2000 and 2007, annual new gold production fell from 2,573 to 2,444 metric tons, according to bullion vaults of the global central banks.
During times like this, those with precious stones are reluctant to sell them. For those who are willing, they end up asking for lots of money. As a result of the decline in the availability of gold, if you had made a move and bought your fair share of the metal, you would be making handsome profits from their sale.
3. Portfolio Diversification
You can never tell when one form of the securities would be outdone by the other. It may sound more lucrative to invest in bonds and stocks. But as an average person, it would come in handy if you diversified your portfolio with some precious metals.
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4. Geopolitical Uncertainty
Trust in global trade unions keep on experiencing crises. This was most recently seen in the recent case of the European Union, where some countries wanted to walk out of the coalition. Similarly, when nations are against each other, the geopolitical tensions rise. This makes the currency in those particular countries deflate.
Business can become hard to conduct, resulting in global economic burden. The value of the currencies goes down and investors start hoarding cash. At those times, many see the safest place to invest is with precious metals.
Eventually, gold becomes hard to buy due to the shooting up of its demand. For individuals to have their investment in gold, it’s a great time to take profits.
Conclusion
Gold is one of the ways for an average person to diversify their portfolio. With the economic shifts becoming hard to predict, you never know when your money will lose some of its value. Similarly, precious metals are the right way of investing with less risk compared to stocks, which sometimes end up not yielding the much-anticipated returns. Ultimately, gold has been known to be a hedge against inflation, making it an investment strategy you might want to consider.
Questions for Discussion: Have you ever invested in gold? What was your experience like? Do you think their is more risk in investing in gold, stocks or bonds?
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