Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Five Reasons Why Gold is Still a Superior Investment

Commodities / Gold & Silver 2019 Nov 09, 2019 - 06:19 PM GMT

By: Submissions

Commodities Gold has been the most popular form of investment and one of the most reliable assets recognized for its multiple use and rare value. Following the recent introduction of other investment substitutes, a number of people are made to believe that gold is less superior than the others. This article will highlight five reasons why gold has not lost its value, but still thrives as an investible

A perfect Asset for Portfolio Diversification

Portfolio diversification is a very important risk management strategy in the world of investment that makes use of mixing multiple digital assets in a portfolio. The rationale behind this strategy is to have an asset standing when most of the investments in the portfolio are falling. It is worth noting that the best way to diversify a portfolio is to have assets that do not correlate with each other. In other words, one or two of the invested assets must not be dragged by the price movement of the others, and this is where gold comes in. When it comes to correlation with other major assets, gold has a zero to negative correlation. In other words, it has no significant correlation with most of the major assets, making it a perfect portfolio diversifier. It has also been reported that gold is not usually affected by the macroeconomic and microeconomic factors that affect the prices and returns of investible assets, and this makes it a good fit for risk management decisions.

Hedge against Inflation

The superiority of gold as an investible asset has been evident in its hedge against inflation. According to reports, the price of gold usually rises when all other stocks fall in the midst of general increase in price of goods and services leading to high cost of living. In the last 50 years, the price of gold has always risen when stocks fall in period of high inflation. The reason is linked to the fact that gold is mostly priced in currencies that undergoes high rate of inflation, leading to the rise in price of gold. Similarly, the price of gold tends to soar during a period of deflation that comes from economic recession. When fiat currencies depreciate in value, the gold price soar as the price of all other stocks fall. This is mostly because people convert currencies into gold to avoid being affected by the depreciation. The price of gold stands tall during the period of market recession and market boom, making it a superior investible asset to the rest. Gold has over the years been a good object for store of value. The stability of its price reduces the risk of losing the value of a converted physical asset to inflation.

Potential Price Increase Due to Supply

The supply of gold has declined over the years as the production of gold from mines has not been much effective since 2000. Most of the golds we find in the market are from bullions issued from the vault of global central banks. This makes it a perfect asset for investment as they have the potential to stage a bull run. In economics, when the supply of an asset falls, the price increases. This coupled with the high demand of the metal for its valuable use causes the price to spike.

Incredible Liquidation

Investing in gold does not only provide a safe havens for the investment of individuals, and provide risk management strategy through portfolio diversification. It also has an incredible pace of liquidation compared to other investible assets like the real estates. Unlike most of the investible assets, gold has no lock-in period. The redemption amount of physical gold is mostly determined by factors such as the market price and the purity of the gold. The redemption amount of paper gold depends largely on the market price on the redemption date.

It Has the Ability to thrive in unfavorable geopolitical environments.

One main thing that makes investment in stocks, cryptocurrencies and others dangerous is the quick response to unfavorable government and political uncertainties. Most of the popular stock prices are bound to fall considerably at the announcement of an impending war. Surprisingly, gold thrives and soar even higher during period of political uncertainties. Prathamesh Mallya, a Chief analyst, and expert in commodities and currencies wrote that the gold price had been hovering between $1300 and $1350 in 2018 despite the geopolitical situations that hampered the performance of investible assets. Statistically, gold has a perfect correlation with political uncertainties and tensions between economic superpower countries. In the face of war, investors mostly raise concerns about the state of the traditional assets, and switch to gold which has been said to be a safe haven. This, in the long run, plays a huge role in driving the price to the moon.

It was even reported that the current tension between the U.S. and Iran which has raised fear of a possible war can drive the price of gold higher. Among all the known investible assets, gold would always remain superior because its demand goes beyond investment purposes. It is usually demanded for its intrinsic value and the multi-purpose it serves. The price of gold is sometimes driven by the currency market since it is denominated in the U.S. dollar. As an asset that thrives when all other assets falls, and as an asset that has real value outside its investment purposes, gold still stands as superior in the world of investment.

By Michael Kuchar

© 2019 Michael Kuchar - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules