Is Gold a Good Investment? 7 Reasons to Invest in Gold

People invest in things for a variety of reasons. There are those who want to get rich quickly while others just want to set some money aside for their retirement. You will also come across people who want to invest because they want a house, expensive sports car and whatnot. As investor profiles are becoming broader and quite complex with each passing year, it is difficult to imagine that despite so many options available, gold is still arguably the most sought after investment option.

It would be fair to say that among all the metals available out there, gold is arguably the most storied and its value has been quite stable for centuries. Even in the current age where smart phones and space travel have become quite common, people prefer investing in gold, which goes to prove how valuable this metal is.

That said, millions tend to have different values when it comes to investment and other things. They do not hold the materialistic values of past generations and prefer investing in conflict free jewelry, clean energy, fresh farm foods etc. Keeping all of this in mind, would gold still be a good investment? Well, mentioned below are some common factors worth considering before you invest in gold and other metal options.

Gold Keeps Its Value

More often than not, investments tend to suffer from devaluation and entropy. If you purchase a house or a condo today, there is a good chance that its value will increase in a decade or two, depending on the market’s behavior. On the other hand, gold is an entirely different kind of investment as it does not depend on how the market behaves.

Ever since mankind has existed, traders and merchants have been using precious metals for bartering purposes. Sure, there are many metals that used to be precious a long time ago and have lost their value ever since, but gold is not one of them.

The discovery of new ways to mine and rare metals has been quite favorable for certain metals like silver and gold and is a big reason why their worth is still high. In some cases, the value of these metals increases greatly whenever a national currency becomes devalued. Pure gold tends to be a soft mineral; therefore, it needs to be alloyed with zinc, platinum, palladium , copper and other hard metals before using it in the form of jewelry or storing it in the shape of bars.

That said, both gold and pure alloys can resist moisture like nothing else, which is why they never deteriorate, corrode or rust, even if centuries pass by. Because of this, gold remains and incredibly popular component for luxury watches, wedding rings and heirloom.

The Value of Money Doesn’t Affect Gold

Until the early part of 1900s, the American currency was run according to the gold standard. This means that the government did not have the right to choose the worth of their money. So, if the United States sold gold at a per ounce rate of $699, the value set by customers, suppliers and vendors of free markets, the worth of the U.S Dollar would essentially by 1/699 out of 1 ounce of gold.

Today, however, things are massively difference as the fiat money falls and rises based on the actions, perceptions and sentiments of people. For instance, because of rampant, smuggling, corruption and heavy taxation, Greece’s government had to declare bankruptcy quite recently. This ended up revealing multiple blind spots in the monetary and political systems of the European Union.

The currency of Venezuela, Bolivar, also plummeted recently because of hyperinflation. Believe it or not, the value of 1 million Bolivar is only worth 0.11 Dollars in the U.S. Gold, on the other hand, is completely independent of the fiat currency’s value. No matter where you go, you will always come across governments, corporations and jewelers searching for gold, mainly because they have a limited supply. Therefore, not matter how abysmal or healthy the currency of your country is, gold’s value remains stable despite trade deficits and national debts.

A Shield against Geopolitical Turmoil

Unfortunately, there are plenty of dictatorships still going strong in today’s world. Whenever there is a totalitarian crises, many governments tend to take the resources of the nation under their control, which includes precious metals as well.

Many people have invested in national assets such as uranium, copper, oil and several other things, only to find out their investment turned to dust because of political turmoil. Many people refer to gold as “crisis commodity” mainly because it can come in handy during turbulent times. More often than not, gold has outperformed almost every other type of investment during economic collapses, calamities and times of war with relative ease. It even came in handy during 2008s housing crisis, which was a terrible downturn faced by many people.

A Moat against Depression

Bankers across the globe are well aware that the world gold is used synonymously with various financial buzzwords such as shield, moat and hedge. Those who want to moat or hedge against financial depression must consider investing in things that will remain untouched despite the economy crashing down.

In most cases, economic downturns tend to have a chain reaction, where thousands, if not millions of people leave the stock market, sell their houses and lose their jobs. Gold can be an exceptional moat or hedge against depression as it tends to be indifferent towards the local currency’s value.

Millions of Americans suffered during the Great Depression during the 1930s and sunk below the poverty line. However, rather than acclimatizing to the economical environment and losing its value, the value of gold increased.

Protects You against Deflation and Inflation

Inflation and deflation are common financial principles dictating how much everything will cost. Higher inflation means that the buying power of your currency will be lower. On the other hand, if the economy is deflated, you can purchase more with less money. While high deflation may look good on paper, it can affect you in many ways. This is particularly true if you are an investor. Why? Because the rates of the commodities you are backing won’t be high, resulting in low or even no profits.

When it comes to precious metals, however, high rates of deflation can be especially bad for your portfolio because the metals you purchased at a high price will have a lower worth. High rates of inflation are bad for everybody, especially when employment numbers and wages are stagnant. Generally, inflation increases whenever production costs, raw material and employee wages increase greatly.

That said, it can also rise from an increased need for services and resources and lack of supply. Those of you wondering whether gold would be a good investment must keep in mind that this precious metal has held up pretty well during times of inflation over the centuries. Of course, there were periods where the value of gold went down, but it happened rarely and eventually, the value of gold increased.

People Will Always Want Gold

Since gold is an ancient metal, one might assume that individuals and organizations are slowly but surely running out of ways to utilize it. In reality, however, things are quite different, as gold’s uses have massively increased with time. Believe it or not, there is a high likelihood that you have gold right now, without even knowing it. How? Well, gold is used in calculators, Apple devices, smart phones, microchips and a plethora of other electrical devices.

More and more industries are realizing the importance of gold, which is why there is a high likelihood that its value will remain stable and eventually increase.

Gold Makes You Immune to Depreciation from Supply and Demand

The global economy runs on demand and supply, which essentially determines the price of services and goods. So, whenever something seems difficult to get, such as uranium or aviation fuel, their prices increase and their accessibility goes down. The same principle applies when something tends to be rare.

While there is no denying that gold is rare, it isn’t by much and is easily accessible to the public. The production of gold has been going downwards since the 90s, which is why gold rates have been appreciating ever since.