Gold is respected around the world and is seen as a special and precious metal, which has been recognized by cultures for thousands of years. Throughout the centuries, people have continued to hold gold for various reasons. Societies, and now economies, have placed value on gold, thus perpetuating its worth. It is the metal we fall back on when other forms of currency don’t work, which means it always has some value as insurance against economic uncertainty.
Now let’s look at few reasons to consider adding gold holdings to our investment portfolio –
Diversification: This precious metal can help diversify an investment portfolio, which can reduce overall risk and volatility.
Inflation hedge: Gold has historically been a hedge against inflation, as its price tends to rise when the cost of living increases.
Safe haven: Gold is often seen as a safe haven asset during times of economic uncertainty or market turbulence, as investors tend to flock to it as a store of value.
Tangible asset: Physical gold provides the satisfaction of owning a tangible asset that can be touched and stored.
Potential for capital appreciation: While the price of gold can be volatile in the short term, over the long term, it has generally appreciated in value.
While gold can help add balance and provide hedges for some investors, there are also risks to watch out for –
Potential long-term performance lag: While gold might outpace other assets at times, it might not hold up as well to long-term price appreciation. If you’re trying to save for retirement, for example, then putting too much money into gold could hold back long-term gains if gold lags stocks and/or other asset classes.