Gold is known to be a safe haven investment. Gold market has a unique position in the world’s political and economic system, which makes it the most liquid market in all market conditions (be it bearish or bullish). Along with offering the highest liquidity conditions, the gold market offers excellent profit opportunities. To make consistent profit and take advantage of gold price fluctuations, market makers need to develop an in-depth understanding of the world gold market.
Gold is acquired across the world for its liquidity and investment qualities. Gold, as an investment vehicle maintains its purchasing power and value in all inflationary periods. The unique properties of gold promote its application across diverse industries. Globally, the demand for gold is based on four primary categories; Investment, jewellery, Technology and Central Bank Reserves. Gold investment can be done through buying stocks, exchange-traded funds (ETFs) or physically buying. Some assert gold as a unique and essential asset for making an investment due to its several intrinsic qualities. While others argue that it no longer holds the monetary qualities of the past.
Gold is important to the global economy because it has managed to retain wealth throughout the generations. Political and economic uncertainties have become a part of the modern environment, and gold is perceived to be a safe haven by investors during such times. In the past when empires were collapsing, political coups happened, currencies collapsed, in those situations investors who were holding gold successfully managed to protect their wealth. Investors buy gold as a safe haven whenever there is some hint about the occurrence of global uncertainty.
With around $183 billion in trading volume, gold is amongst the most traded financial assets across the globe. Lucrativeness of digital and paper gold is promoting the gold trade. Digital gold has gained popularity during the pandemic and it will continue to gain preference as an investment option over physical gold.
Gold-Right Investment For You
Since gold can be bought in various forms, choose the type of investment that suits your investment strategy. Investing in gold securities is very much similar to investing in any security, the only difference is the prices of gold securities will change as per the stock market. For example: when you invest in a gold mining company, the stock price will reflect the financial soundness and market position of the company more than the price of the gold. Many advocates of gold suggested gold as a good hedge against increasing prices. But studies have revealed that gold is a better hedge against financial crisis rather than a hedge against inflation. During a crisis, gold prices may rise but this might not be the case during high inflation. It would be a wise decision to buy gold at times of recession or financial crisis.
Key Takeaway
Every investment has its own advantages and disadvantages. Buying shares in gold mining companies is a safer alternative to holding physical cash. Financial experts have suggested that you should have a small percentage of your assets in gold. This is so because gold acts as an insurance policy. If the value of all stocks goes down, gold prevents you from losing everything. But nobody guarantees that, so it is advise to proceed with caution while investing in this precious metal. If you are investing in gold with a belief that you would never have losses then you are wrong. Gold investment is similar to any other investment or financial asset. It will also have price fluctuations as a result of changes in demand and supply.
