For years, gold has been preferred as a top investment option due to its continued fast-paced growth. In India, it is a status symbol whereas; other countries see gold as a strong investment commodity. This article covers the 7 top benefits to consider before owning gold.
Quick Insights
7 Benefits of owning gold
There are quite a lot of benefits in gold investments. Below are the important 7 benefits one gets from owning gold:
- Gold is the most liquid asset among the other commodities and hence buying and selling makes it very easy anytime and anywhere.
- Since gold price movements are not much influenced by macroeconomic factors, it acts as a diversification and hedging asset.
- Owning a tangible asset like gold reduces the risk of bankruptcy.
- When you own gold in your portfolio, continuous tracking of gold prices is not required.
- Maintenance is not required for physical gold.
- Unlike equities and bonds, gold can be passed onto the next generation easily and can be gifted hassle-free.
- It is easier to obtain loans against gold than any other instruments.
Why invest in gold?
There are numerous reasons to recommend a buy for gold, the primary reason being that anyone can buy gold easily.
- One does not need any specialized knowledge to invest in gold.
- Once you purchase gold, you need not panic if the price comes down for the reason, buyers emerge in every pullback.
- Gold price is volatile only in the short term as it is majorly influenced by inflation, interest rates, and currency fluctuations. Aggressive traders speculate to profit from the volatility.
- The long-term trend remains intact as it is not influenced by the macroeconomic crisis.
- Large financial institutions, banks, and big investors add gold to their portfolios for hedging purposes, thereby maintaining high demand in the market.
- Gold has high durability and capital growth compared with its peers.
Should you invest in gold during a recession?
As per the historical chart analysis, precious metals like gold and silver rallied before the recession. So, it is always advised to buy gold ahead of a recession as it outperforms other investments.
Gold often tends to hold steady or move up in any kind of economic turmoil as investors panic in the economic uncertainty and look for safer investment options. During the recession, investors have to pull out their funds from equities and enter into the gold market which maintains its stability.
Is Gold a good investment right now?
Provided the overall positive market sentiment, the price of gold is expected to surge and make new highs by the end of 2024. Currently, the gold price per ounce is trading near its all-time highs. Every dip in price gives buying opportunities.
Gold is considered not only an ideal option for investment but also for diversification of portfolios and hedging against inflation and currency fluctuations.
Is gold a good investment for retirement?
Gold is the best investment choice for retirement, as the price tends to move independently. Moreover, retirement-focused individuals usually have a long investment horizon and hence gold is the ideal option for them.
Depending on your retirement financial goal and risk tolerance, your financial advisor suggests adding a certain amount of gold to your portfolio for hedging against the volatile markets.
Is gold jewelry a good investment?
Investing in gold jewelry carries more risk than investing in pure gold. Unless one wears it, there is no point in purchasing gold jewelry because buying gold jewelry is a more expensive option. Below are a few reasons why gold jewelry is not a good investment option:
- Gold jewelry price is expensive because it includes wastage and making costs that may come up to 20% of the gold cost.
- The purity of gold jewelry (24 karat is usually pure) is always lower than that of pure gold.
What are the risks involved in gold investment?
- Unlike equity, gold requires huge investments.
- High price volatility may panic large investors.
- Physical gold carries storage and insurance cost.
- Future trends are difficult to predict based on the past performance of precious metals. The reason is sentiments may turn either side in a highly volatile market.
- The hedgers and speculators primarily boost liquidity in the market and hence price movements are not completely fairly influenced.
- Since gold has different forms, it is crucial to understand its value to decide a buy.
Conclusion
Gold is a very large market that attracts everyone, from institutional buyers to the general public. Investing in gold has been a well-known reliable strategy to protect one’s portfolio from any adverse economic conditions. Despite the few risks involved, gold has been considered a safe-haven asset to invest.
Pro Tip
Frequently asked questions
1. Is gold a good investment for the long term?
Gold price tends to rise even during high inflation and currency fluctuations, giving investors the safe and potential opportunity to invest. Over the past 15 years, gold has been outperforming stocks and bonds.
2. Are gold coins a good investment?
Gold coins are available in so many denominations from quarter-ounce to two or even more, but the in-demand collectible denominations are one or two ounces. Gold coins are usually not priced in line with their gold content. A licensed and reputed dealer sells it up to a 5% markup compared to equivalent gold bullion.
3. Is it safe to invest in gold now?
How safe is gold investment? Though the short-term trend is volatile, gold remains the best option for long-term investment irrespective of any form of gold you choose.
4. Is 14k gold jewelry a good investment?
14k gold jewelry is considered more valuable and affordable than any other gold jewelry, yet the jewelry form of gold cannot be a good investment option because the markup is high.
5. Are gold bars a good investment?
Gold bars or coins or gold bullion is always the preference of everyone when buying gold comes to mind. Gold bullion is available in denominations of 1 ounce to 10 ounces. Since it is an expensive option to purchase gold bars, one should keep watching the price drop of gold to purchase at the lowest possible price.
