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Everyone should own some gold or at least have a position in mining stocks. Gold may not always outperform other investments, but it is still a worthy long-term investment, especially during a financial crisis. The reasons to own it simply outweigh the cases against it.
What’s So Great About Gold?
The shiny metal has a long and esteemed history throughout the world. It has been cherished as far back as ancient Egypt. Not too long
The U.S. dollar was still backed by gold up until 1971 when Richard Nixon removed the gold standard. Now the dollar is just paper money or “fiat money” that’s not backed by any physical asset.
You might still be asking yourself “why do I need to own a hunk of metal?” Well, many benefits come with owning the precious metal. Below are some solid reasons why everyone should own some gold.
Inflation Hedge
Over time inflation eats away at your hard-earned money. Exchanging some of your fiat for gold will help reduce the losses caused by inflation. Gold prices generally go up as the cost of living rises. The value of fiat currency goes down and loses its purchasing power.
Store of Value
Gold holds its value better than paper currencies, coins, and other assets. It is commonly used as a way to preserve wealth and pass it on to other generations. The precious metal doesn’t rust or tarnish, and it is easy to store.
In the chart below you can see the value of gold steadily rising over the years.
The purchasing power of the dollar continues to decline and is near all-time lows as shown in the chart below.
Safeguard for Crisis
In times of financial and geopolitical crises, investors buy gold to safeguard their wealth from economic uncertainty. The 2008 recession is a great example of this. Once the Federal Reserve slashed interest rates and began printing money, the demand for gold steeply rose.
Because it’s mined from the earth, there is a limited supply. So it can’t be printed or easily inflated. But Fiat currencies are constantly being printed, manipulated, and devalued.
Furthermore, when bond yields and interest rates are low, investors tend to favor the yellow metal.
Insurance Policy
Buying gold can be compared to buying an insurance policy. If economic conditions go south, your wealth is better protected. And if the economy stays strong, your gold is still valuable. It’s wise to have a game plan, and owning gold could shield your money from catastrophic events.
Tangible Asset
Unlike Bitcoin, cryptocurrency, and other digital assets, you can hold gold in your hand. The precious metal is a physical and tangible asset. Tangible assets are becoming rarer as society moves further into the digital world.
Cyber-attacks can drain bank accounts, wipe out the power, and erase important financial information. If you own some precious metals, you still have a valuable commodity that can be exchanged for other goods.
Diversification
Precious metals, especially gold, are essential for proper diversification. It’s never a good idea to put all your eggs in one basket. Spreading your investments around will help to safely build your income and protect it at the same time.
Stocks can underperform metals and vice versa. Having a mix of precious metals, stocks, and bonds in your portfolio will reduce your overall risk.
Universally Desired
Gold is universally desired throughout the globe. Most everyone in almost every country will at least have some knowledge of its value. Not much else compares to the yellow metal when it comes to being a well-known and valuable asset.
Easy to Buy and Sale
You won’t have any trouble finding someone willing to buy your gold or sell you some. While it’s no longer commonly used as a currency, you’ll still be able to convert it to cash with ease. Coin shops, refineries, pawnshops, and local classifieds are all convenient places to sell if you need the cash.
Bottom Line
Precious metals are being gobbled up by central banks and countries all over the world. With escalating geopolitical concerns, loose fiscal policies, and negative interest rates, gold continues to shine.
“Gold is money. Everything else is just credit”
– J.P. Morgan, 1912