Is Buying Gold a Good Investment?
Gold was considered a universal currency for hundreds of years. Due to its recognized value worldwide, a gold standard was used as far back as the Byzantine Empire over 1,500 years ago. Until 1944, in fact, gold was used as the world reserve currency. But when it comes to India, gold is a solid investment cause gold does not carry much risk, as we hardly see deflation in the real sense. Even when the official figures, were showing negative inflation (deflation) during the last year, the actual prices of food items were increasing. This was reflected in the gold prices too. Gold is a solid investment even in terms of liquidity, compared to all other investments. At any time of the day and any day gold can literally be converted to cash. Banks would give you a jewellery loan and so would your friendly neighbourhood pawn shop. The global gold value remains unaffected by local political chaos. The demand of gold may go up or down but it never ends. Gold is a good way to diversify an investor’s portfolio because it moves inversely to stock and currency value. High liquidity and universality of gold make it a favoured choice for investors across the globe. It can be cashed easily and it is accepted as a mode of payment and security worldwide. There’s a finite supply of gold in the world, which creates exponential price rises when demand increases. Production cannot simply rise to meet an increased demand, so the supply/demand dynamic naturally drives prices higher. This also reduces the risk of devaluation, as lower prices then quickly attract more, new demand, which will once again fuel price increases. In its physical form, the holder has no risk to any counterparty. This is particularly relevant in today’s new financial world, where money is no longer even safe in a bank account. It also avoids the counterparty exposure that exists with investments in gold stocks, futures and options In fact, many gold investors and collectors take great pride in their coin portfolios, often preserving them within their families for several generations. This habit also contributes to a limited market supply, once again affecting gold’s value!