Investment in its truest terms refers to the purchasing of goods which are not consumed today but rather are utilized in the future for the creation of wealth. Among the several precious metals, gold has been regarded as the most known for investment purposes. It has been the most effective safe sanctuary and hedging of properties over the many different countries. Gold not only is aesthetically desirable but rather valuable when it comes to monetary means and this is most especially true in recent years.
Gold played a major role when it comes to the economies of a lot of nations. It was considered as universal currency for over a hundred of years. These days, gold is not anymore the primary form of currency in this developing world however it has remained to be known as an investment for several reasons.
Below are the advantages of having gold as an investment:
– Gold has the property of liquidity which means that it can be converted easily into cash anywhere throughout the world.
– Gold is able to hold its value with maintenance over time. No matter if its price is decreasing, its underlying value not practically change that much because the gold has a fixed quantity because of its property as a commodity.
– It prevaricates against the inflation. This means that the gold increases its value when there is inflation. Gold is priced in U.S. dollars so whatever decline in the dollar will lead to increased price of gold. This will result the gold to offer a more stabilized investment compared to cash especially during inflation times.
– Gold acts inversely with the stock market as well as currency values so it is able to provide an effective way for diversification.
– It is still regarded as a universal investment due to the fact that it is a commodity.
– Gold is used in producing a wide variety of products like jewelry and electronics which is the reason why its demand is reliable which further stabilizes the gold price.
Below are the disadvantages for having gold as an investment:
– Gold does not earn a passive income that you can only have the return when its value increases and you come up to the decision of selling it.
– There may be a lot of investors for gold but when they begin to panic the gold may be overpriced. This will mean that the investment might lose value as the price will correct itself.
– Gold needs a physical storage as well as insurance so that you can still be able to replace it once stolen and damaged.
– Gold is collectible in the United States making its capital gains tax rate higher which is about twenty-eight percent.
– Gold does not offer returns adequately to other markets because its value only increases as the dollar is devalued or when the inflation is strong.
Most of the time, gold has been regarded as a safe investment especially in times of uncertainty with regards to finances. It can be a good investment when all other investments fail. Just make certain that you are ready to take the risk for there are both advantages and disadvantages when you invest for gold.