The Top Reasons to Invest in Gold Today
Throughout history, people have invested in gold as a store of value. There are substantial benefits of investing in gold, from an assured increase in value to backup funds. The cultural history of gold investments ranges from celebratory investments to a stable investment portfolio.
Today, there are so many options to invest in gold. Barring physical gold in the form of coins, bars, or jewellery, virtual gold and paper gold are some other options. In India, the RBI issues sovereign gold bonds for those who do not want to hold physical gold.
Additional read: Is Sovereign Gold Bond (SGB) a good investment option
Irrespective of what kind of investment you make, the benefits of investing in gold are numerous. This article will highlight the top eight reasons to invest in gold.
Why Invest in Gold?
1. A Store of Value
One of the obvious answers to why invest in gold is that the precious metal is a store of value. For generations, its value has only increased with time. That’s because gold is a scarce metal and has significant social and cultural value. People want more of it. As a result, gold prices are constantly appreciating. If you want an investment instrument that will give you value appreciation in the long term, you should consider including gold in your investment portfolio. It doesn’t have to be just physical gold. You could also purchase virtual gold or sovereign gold bonds.
2. Hedge Against Inflation
Over the years, gold has acquired the mettle of being a hedge against inflation. If the cost of living increases, the value of gold rises with it. Over the past 50 years, the price of gold has soared, even when markets have plummeted or the value of the currency has fluctuated. If you want to protect yourself against rising prices, then including gold in your portfolio should be a must.
3. High Liquidity
When you invest in an asset, an important factor to consider is its liquidity. Without adequate liquidity, your investment will not be useful in times of need. Gold is an extremely liquid asset. Whether you want to sell physical gold, or trade virtual gold in exchanges, there will always be enough buyers who want a slice of the pie. In times of emergency, you can bank on your gold investments to bail you out.
4. Portfolio Diversification
The price of gold is inversely related to the price of other market securities. When equity prices fall, or the broad market goes through a slump, gold increases in value. It is considered a safe haven asset. This is because the general society thinks of gold as highly valuable. If you want to build a solid portfolio that is well-diversified and risk-protected, then you should include a proportion of gold in your portfolio.
5. Mortgage Value
Another big benefit of investing in gold is that it has mortgage value. In case you need funds, you don’t have to sell your gold investments. Instead, you can pledge them to a lender and take a loan against it. Even virtual gold and sovereign gold bonds can be pledged as collateral to get a loan from a bank.
6. Protection Against Uncertainty
Whether there is political uncertainty in your country of residence or geopolitical uncertainty, gold can protect you against wild currency fluctuations. As mentioned before, gold is considered a safe haven asset. When the rest of the assets in the world are in a flurry, you can count on gold for stability and value protection.
7. Central Bank-Approved Investments
Since 2010, central banks across the world have been increasing their gold investments. This is to diversify their assets and maintain a store of value in case their currency faces volatility. If central banks of large countries and institutional investors are turning to gold as a store of value, then it is a sign that individual investors can also bank on gold to meet their financial requirements.
8. Supply Constraints
Anything that has limited supply has more value. The supply of gold has been steadily decreasing since the 2000s. Finding new gold mines has been difficult, and even with the ones found, mining can take between five to ten years. As a result, the value of gold is bound to increase. If you invest in gold, you can reap the benefits of increasing prices.
You are entitled to numerous benefits if you choose to invest in gold. It helps with portfolio diversification, is a store of value, and can protect you against inflation. The question shouldn’t be why invest in gold, rather, it should be how to invest in gold. You can invest in physical gold, virtual gold, or the latest tranche of sovereign gold bonds that the RBI is set to issue soon.
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