It is no secret that gold has been a popular store of value and financial asset worldwide. It doesn’t lose value over time and is still considered a solid investment, as the gold mining industry is expected to jump from $214.1 billion in 2021 to $249.6 billion by 2026. This article will discuss why you should consider investing in gold, despite having other investment options.
A Good Hedge Against Inflation
People have used gold as a store of value because it doesn’t lose its value over time and generally withstands fluctuations quite well. Hence, it is an excellent option to shield yourself from inflationary pressures. The year 2023 is expected to have high inflation, just like 2022.
The Personal Consumer Expenditures (PCE), used to measure the money people spend on goods and services, stands above 6%, an unprecedented number. Similarly, the FED has recently raised the rates only slightly. Looking at all the economic indicators and the FED’s response, gold is an excellent investment in 2023 and beyond.
Intrinsic Value
As we all know, things that are rare have more value, and gold is no exception to this rule. Precious metals stay precious no matter where you are in the world. Therefore, you’ll have a quality store of value whether you reside in the United States or China, providing you with financial security like no other asset on the market.
Portfolio Diversification
The clouds of recession are still looming over the economy, as Goldman Sachs says there is a 25% chance of it happening in 2023. During such precarious times, the stock market and real estate investments also take a beating.
As a result, gold automatically becomes a safer avenue for investors. It protects you from market volatility by diversifying your portfolio and reducing exposure to risky assets. Even if you encounter losses from other assets, gold will ensure that your investments don’t go completely down the drain.
Better Liquidity
The liquidity of an asset means how quickly you can turn it into cash by selling it. The easier it sells, the more liquid it is. During economic uncertainty, it is essential to have assets that can help you pay bills and cover other expenses.
Many other investments, such as bonds, real estate, stocks, etc., are illiquid because you cannot convert them into cash quickly. Selling them during an economic downturn when demand is already low is even more challenging. On the other hand, gold can be rapidly converted to cash, making it a highly liquid investment.
Lower Supply
The gold in the market has come from global central banks since the 1990s. However, it slowed down after the 2008 economic crisis, while its production from gold mines has declined since 2000. For instance, according to BullionVault, its output from 2000 to 2007 declined from 2,573 metric tons to 2,444 metric tons.
Although the production picked pace for a decade and peaked at 3,300 metric tons in 2019, it dropped to 3,000 metric tons in 2021. The current decline in production suggests a supply constraint, which can take a few years to return to the previous production levels. So, as the supply gets tighter, the prices will increase, making gold a great investment.
A High-Value Possession
In the modern era, your assets are always at risk of hacks, internet blackouts, investment fraud, etc. However, gold has no shortcomings, as it protects you from these windfalls. It is true that you need to keep your gold at a safe location and get it insured against theft.
However, it is still not as vulnerable as something entirely out of your control, like an elaborate hack from malicious actors.
An Investment with Privacy
Most modern-day investments require elaborate consultations with third-party consultants and firms. You must contact these parties to build a portfolio and access your investments. Moreover, investment scams have risen by 193% in the last five years.
Precious metals like gold can help you avoid these issues by keeping your investment private and safe.
Conclusion
Gold should be an essential part of your plan if you want to build a solid, diversified portfolio that can withstand risks. It helps you stay afloat where other investments like stocks and bonds fail. Gold is and will remain an attractive investment from a shield against inflation to better liquidity.