People invest in gold for their own reasons. Some do it to preserve their own wealth, there are others who do it to actually increase their wealth and many managed it in the past with much success. There are tons of reasons to invest in gold and on this page I will present to you my top 9 reasons to invest in gold.
- 1 9 Reasons to Invest in Gold
- 1.1 1-Gold has a history of holding its value
- 1.2 2-Gold’s limited supply
- 1.3 3-Gold is a hedge against geopolitical uncertainty
- 1.4 4-Portfolio diversification
- 1.5 5-Gold is money
- 1.6 6-Gold unlike fiat currencies is not a claim on someone else’s liability.
- 1.7 7-The war on cash.
- 1.8 8-Loss of confidence in central bankers.
- 1.9 9-The weak dollar.
- 1.10 2022 More reasons for gold to rise
9 Reasons to Invest in Gold
1-Gold has a history of holding its value
Unlike paper currency, coins, or other assets, gold has maintained its value throughout the ages. People like to invest in gold because they see gold as a way to preserve their wealth from generation to generation.
In reality, gold is a hedge against inflation. Its price tends to rise when the cost of living increases. During the years of highest inflation after World War 2 (1946, 1974, 1975, 1979, 1980,) the average real return on the Dow Jones Industrial Average was -13,33% compared to +130,4% for gold.
2-Gold’s limited supply
Due to increased wealth in emerging markets, which has resulted in increased demand, this may result in supply constraints boosting the price of gold. India’s appetite for jewelry and China’s appetite for gold, to build up reserves to back the yuan, which the country wants to serve as a world major currency.
3-Gold is a hedge against geopolitical uncertainty
That is why it is called a “crisis commodity,” because people flee to its safety,” when world tensions rise it outperforms other investments. It also does well when confidence in governments is low.
Gold has always played an insurance role in portfolios for various reasons. (global disaster, inflation, war, etc.) Now it’s against the possibility that bankers will not be able to unwind all of their debts without creating big problems.
5-Gold is money
No matter where you go if you have gold is like having money, you can exchange it right away, in some countries it’s easier to trade gold, rather than local or certain currencies.
6-Gold unlike fiat currencies is not a claim on someone else’s liability.
Gold has never lost its value for exposure to mismanagement, corruption, theft, war, etc. There has never been (and never will be) a haircut to gold, as it’s been happening with debts and savings.
7-The war on cash.
Interest rates are negative in many places in the world including Europe and Japan. Central bankers like Mario Draghi and Christine Lagarde are been called to eliminate high denomination bills. There is a war on cash, and a war on savings, and people are seeing it now and they are looking for other options to preserve their savings.
8-Loss of confidence in central bankers.
Unfortunately, the central bankers did not reform their banks and their operations. The Europeans and Japanese are trying to stimulate growth by negative interest rates. In the US, the Federal Reserve backed away from the December 2015 policy to increase interest rates in 2016.
The biggest issue is of course, how they will deal with all their debts after years of quantitative easing in the form of bond purchases. It looks like we are all lab rats in their grand experiment.
9-The weak dollar.
Gold moves in the opposite direction of the American dollar and the dollar is still weak, even though as we speak it is surging forward. If the dollar continues to surge forward, soon we will be talking not about the weak dollar, but about the strong dollar.
2022 More reasons for gold to rise
2022 is the year that presents a great opportunity for gold due to unpredicted circumstances.
- The global recession is here
- The Russian attack in Ukraine and the sanctions
- The disruption in the global supply chain
- The looming famine
- The covid-19 effect on the global economy
- The overvalued and overpriced markets
- Inflation is out of control
- The world global debt is out of control
I hope my 9 reasons to invest in the gold article have covered you. If you have any questions feel free to write a comment and I will answer back.