Investing in Gold
Gold has been considered a universal currency for thousands of years. During this time, it has played a huge role in the economies of many nations. While it's no longer a primary form of currency, investing in gold still makes sense in the current era for several good reasons.
Why Invest in Gold?
-Liquidity: Because it's universally recognized, gold can be converted into cash quite easily in most parts of the world. Cash aside, the liquidity of gold is arguably unparalleled.
-Store of value: Unlike most assets, gold tends to maintain its value over time. While some argue that gold's true worth cannot be determined, the underlying value still remains even when prices fluctuate. This is because the global supply of gold is fixed, whereas the supply of conventional currency tends to change.
-Hedging against inflation: During times of inflation, the value of gold rises. In fact, the prices tend to soar as the stock market plunges during high-inflation periods. It hence offers a stable haven for investors during such times.
-Diversification: Adding gold to your investment portfolio is a good way to diversify and lower the overall risk. And because the value of gold moves inversely to that of stocks and currencies, it provides an effective way to diversify.
-Reliable Demand: Gold is used in the production of various goods, such as jewelry and electronics. As such, there's always a reliable demand which goes to further stabilize gold prices. And when demand from other sources increases, these markets tend to force the price higher.
Considerations
While Gold can be a great investment, you should take note of a few points before taking the plunge. First, gold does not earn passive income, like is the case with bonds and stocks. While the latter could derive part of their value from the income they earn in dividends and interest, the only return you can make with gold is when you sell it.
Capital gains tax rates are also higher on most gold investments. This is because gold is legally considered to be a collectible. You can therefore expect to pay about 13% more in taxes than you would with ordinary capital gains.
When to Invest in Gold
The best time to buy gold is when inflation is expected to occur. To know when your country's currency is going to be devalued, look for pointers like stock market declines and political turmoil. Another good indicator is when reserve banks announce that they're going to print more local currency. The earlier one can detect such drops, the bigger the opportunity they have to make a profit.
Learn more about buy gold
Gold can be a good addition to your investment portfolio because its price tends to increase while the value of paper assets drops. Although its prices can be volatile in the short term, its value will always remain over a longer period. It's thus an investment well worth considering.