The timeless reasons for owning gold – the reasons behind gold’s universal role as real money – haven’t changed. In this article we’re taking a look at 10 reasons for buying gold.
Gold is still the best way of storing value over the long run. Therefore, your mindset shouldn’t change with short-term price fluctuations in the “paper” market. If you don’t already own gold today, you should consider buying physical gold bullion.
I hope you enjoyed this brief article about 10 reasons for buying gold
Don’t confuse physical gold with paper gold. Gold bullion is very different from buying and holding securities with exposure to gold. The paper market for gold is fraught with both counterparty risk and speculation, which makes it unsuitable as a long-term store of value.
The reason gold bullion is so special is that it’s durable, divisible, consistent, convenient, and have value in and of itself. These are characteristic that makes it unique.
Here is a list of 10 reasons for buying gold.
1. Gold is money
Gold is universal money – a tangible store of value and protection.
2. Gold preserves value over the long run
Gold has served as a way of preserving and protecting wealth throughout history. No fiat currency has ever stood the test of time – all of them have eventually returned to their intrinsic value, which is zero.
3. Gold acts as a crisis hedge
During periods of turmoil gold tends to increase sharply in value. It’s during these times that you will be especially glad that you hold gold.
4. Gold protects value during periods of higher inflation
Gold is a hedge against significant price increases in asset prices as well as the cost of living, because its price tends to rise when inflation increases dramatically.
We haven’t seen a global deflation since the Great Depression of the 1930’s. This was a time when the gold price performed strongly. We have seen periods of significant uncertainty and deleveraging though, especially in the wake of the financial crisis of 2008. During this time gold performed very well in comparison with for example stocks.
6. Limited supply
Unlike paper money that can be printed on demand the supply of gold doesn’t change much.
It’s of course difficult to know for sure, but according to some estimates the total amount of gold ever to have been mined is about 165,000 metric tons. The annual supply of newly mined gold is about 2,500 metric tons.
The story with fiat currencies is different. Just between 2002-2012 the monetary base in the U.S. increased fourfold…
7. No counterparty risk
Gold is the only financial asset that at the same time isn’t someone else’s corresponding liability. When you buy a paper gold security or a futures contract you will always have a counterparty risk. The same applies to both bonds and stocks.
8. Gold is anonymous
You can buy and hold physical gold privately and anonymously.
9. Gold is portable
Gold bullion is very portable, liquid and easy to store. You can transport significant amounts on your own person.
In a world that is getting increasingly globalized, assets tend to correlate more and more, meaning they move in tandem. Gold on the other hand has historically displayed negative correlation with other asset classes.
So ignore the “gold bull” comments from some people. Adding physical gold to an investment portfolio consisting of stocks and bonds is just common sense. Research show that returns often come from a sensible asset allocation strategy, rather than trying to cherry-pick the best investments.
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