Is Gold A Good investment?

 

Gold in our market today is unique in that it is both a commodity and a currency. 

So some investors will hold it purely as a financial asset and others may hold it in the form of jewellery, so it could be.Many people find gold to be a good investment because it can act as a diversifier in a typical portfolio.

Central banks and financial institutions also played an important role in gold demand, and in 2021 central banks held more than 35,000 metric tons of gold, about one-fifth of all gold ever mined. Also, it is a way to accumulate wealth. It's really interesting because it's been around for a long time, which just shows the strength of what it was and how it played in the market with average daily trading volume.

But his skepticism calls it a resource without any utility. You know, one of the main characteristics of gold is that it has no income attached to it, does not give any income. It does not pay dividends like stocks. It doesn't have a coupon like a bond, but a preference. Gold demand is consumed by the jewelery sector and then we have a much more volatile piece, perhaps up to a third, up to 40% which is used by the investment sector. But when we look at the technology component that is much smaller, it usually is.

Much of the world, including the United States, won the gold standard where they basically set the value of their currencies against gold, and that basically meant, you know, a very large portion of the central bank's reserves. A few years on and central bank purchases have increased and in fact in 2018 we saw purchases of over 650 tonnes. So that appetite to buy gold continues. Yes, there have been times where we have seen.

Holdings hit their highest level since 1999. That's very close to the level it hit in 2011, but it's also close to the high it reached in 1980. So when we adjust prices, I mean look at it, whether we're looking at the GDP deflator or we're using the US CPI, we can look at it.

Hedge against any kind of market volatility. Take, for example, the Great Inflation of the 1970s. Between 1970 and 1979, the United States suffered one of the worst inflation rates in recent history during this period. This is a huge advantage over any other product. The dollar and gold have an inverse relationship. So as for the value of the dollar, you know that the US currency is often pulled back.

Go to the other side. So it proceeds positively in such situations, because if it is not susceptible to inflation, it will not lose its value like other assets, and so on. Why do investors invest in gold? The same applies to deflation. Between 2008 and 2012, gold became the most sought-after commodity during economic or financial crises.

Adjusted for inflation, it is around $1970 an ounce. It hit an all-time high of $2021 an ounce overnight, settling above $2000 for the first time in August 2021. And if you look back at the last five, big market corrections, you know the tech bubble.