Reasons to Include Gold in Your Portfolio
Gold and other precious metals have earned a lot of respect in many civilizations because of their inherent value and rich history. Hundreds of cultures have used them and considered them valuable for many years. The coins with gold in them first appeared around 650 BC, and the first purer money was discovered a century later during the reign of King Croesus.
As centuries passed, many people who are not royalty have discovered gold and its many uses. As new economies and societies emerge, the value of gold continues to rise as well as its mining. This is the metal that many people fall back on when they start to lose faith in their government’s currencies. Other precious metals have served as a hedge and insurance when the economy begins to fall.
For people interested in adding gold into their portfolios, the good news is that this process has been made simple by many trusted and legitimate companies in the market. If you’re one of the investors who want to know the process of buying and selling, you can check Augusta Precious Metals review for more information about owning some bars and coins today. The reviews on the internet will help you determine the factors you need to look for when searching for companies.
Why Should You Include Precious Metals?
- They Have a History of Holding their Value
The metals may differ from paper currencies in some respect. They have maintained their value for centuries. Since ancient times, many people have valued the appearance and unique properties of these precious metals. Many families have seen gold as an asset that they can use to pass their wealth on to the next generations.
Gold is malleable, does not corrode, and can be melted over a flame. It can be converted into stamps and coins, and they are easy to work with. Their color is considered beautiful, unlike the appearance of other elements.
The electrons are fast-moving, and the atoms are heavier so they can absorb some light. The theory of relativity by Albert Einstein comes into play because of the electrons of gold traveling at half the speed of light. Read more about Einstein’s connection with the gold atoms on this site here.
- Weakening of the US Dollar
The US dollar is one of the most important currency reserves in the world. However, its value has been known to fail in the years 1998 and 2008, which have prompted lots of investors to turn their money into gold. This has raised the prices of the metals, and they nearly tripled, reaching the $1,000 milestone for each ounce.
Between 2008 and 2012, it has hit over $2,000 because there was a significant decline in the US dollar’s value. Some of the reasons why the currency’s value has declined include more substantial trade deficits, an increase in money supply, and the USA’s large budget in a year.
- Hedge Against Inflation
Historically, precious metals have been an excellent diversification tool. For over 50 years, many investors have seen their assets soar because of gold, silver, platinum, and palladium. The prices of each ounce also rise when the costs of living in a country increase. This is concerning the plunge of the stock market and during the years where inflation is very high.
The fiat currency has seen a loss of purchasing power as the years go by. This is where the price of bullions and coins tends to rise. Additionally, many people see gold as something with a stored value, and they are usually enthusiastic about buying when the local currency loses its overall value.
- Protection from Deflation
Deflation is when the prices decrease, and business activities are slowing down. This is when the economy has a lot of debt, and this was prevalent in the Great Depression of the 1930s. A small degree of this occurrence also happened in 2008 when severe worldwide economic crises were evident everywhere.
During the time of the Great Depression, the value and purchasing power of many metals has soared while the other fiat currencies have sharply dropped. Many people are hoarding cash to put into metals because one of the safest havens at that time is gold.
- Stability in Times of Geopolitical Uncertainties
The value of precious metals was retained despite some financial uncertainties. In times of geopolitical chaos, where it’s often called a crisis commodity, people tend to flee to a safer place. When world tension is rising, silver and other metals have consistently outperformed other investments and asset classes.
As an example, the prices of gold, silver, and other precious metals had made major price movements when the crises occurred in the European Union. Learn more about the European debt crisis in this link: https://en.wikipedia.org/wiki/European_debt_crisis. The price often rises when the people’s confidence in its government is very low.
- Supply Constraints
Many of the supply of precious metals in the market has come from the sales of bullions in 1990. Gold was pulled out from the vaults of the central banks, but this activity slowed in 2008. Simultaneously, there is the declining production of mines all over the world, and the result is that the mining output has steadily declined over the years.
Data from BullionVault.com stated that the output started from 2,583 metric tons in the year 2000, and in 2007, the numbers fell to 2,444 metric tons. It takes around 5 to 10 years to research a good location for a new mine and ensure that it will be sustainable. As a rule, the demand increases as the supply decreases, making the prices soar to their new heights.
- An Increased in Demand
Many emerging markets and economies have increased their demand for gold because of a boost in their wealth. In some countries, the bars are usually for saving purposes, but others wanted jewelry. With this said, the Indian wedding season in October has seen the highest demand for genuine gold jewelry around the world.
The demand is also growing for investors and those who want to include the metals into their 401k plans. Many are seeing these kinds of commodities as funds where they can allocate a part of their retirement or diversify their portfolios.