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Is it still worth investing in gold?
Home » EuropeFX Review Blog » Is it still worth investing in gold?

Is it still worth investing in gold?

Sofia Christou November 3, 2020 8:51 am

Some investors choose to invest in gold using ETFs, purchasing stocks from gold miners or buying the actual product. There are various methods to invest in this metal and there are solid reasons to do so. 

Some people say that investing in gold is outdated as it doesn’t have the value it used to. They argue that the only use of gold is in jewellery. There are also people who argue that gold has authentic value and it is necessary to diversify the portfolio. 

Gold no longer backs any worldwide currencies, but it is still important nowadays. The fact that gold is still important to the economy remains solid if we look at the balance sheets of central banks and other financial institutions, among which is the International Monetary Fund. Currently, these institutions are accountable for holding almost ⅕ of the global supply of on-ground gold. Also, some central banks have done additions to their gold reserves that indicate concerns about the long term worldwide economy. 

At the time of rising inflation, gold preserves wealth. When investors realize that money starts losing its value, they invest in hard assets that consistently preserve their value. The rise of gold prices during rising inflation in the 1970s presents a great example.

Gold rises against the dropping US dollar due to its pricing in dollars around the world. There are two reasons when it comes to this tendency. Investors become interested in buying gold and to do so they need to sell their dollars. Also, a less strong dollar makes gold cheaper for investors who own other currencies. 

Political and economic uncertainty make investors look at gold as a safe haven. Do you wonder why it is so? From centuries past there have been collapses of governments and subsequently currencies. Investors are looking to protect their wealth by investing in gold. So whenever there is time of some kind of economic crisis or tension, investors buy gold to stay on the safe side.

Overall, gold is a diversifying investment. When you invest in gold it serves as a diversifying component to your portfolio, regardless for which reason you invest in it. 

Often gold appeals more to growth investors. The stocks of gold rise and fall as the price of gold fluctuates, although the stocks of gold mining companies remain at the top even when the price of gold drops. Often the owners of gold stocks have a higher ROI than the owners of physical gold. 

The sector that includes companies that mine gold may experience high fluctuations. When establishing the distributed profit of gold stocks, you should take into account the company’s achievements over time in regards to the distributed profit. Company’s performance of paying distributed earnings and its dividend payout correlation are the main elements to review in the business’ balance sheet and other financial documents. 

There are various ways in which you can own gold. It can be jewellery, coins or gold Exchange Traded Funds and futures. For every investment there are pros and cons – the same is with gold. It is possible to protect yourself from currency inflations by means of investing in it. Also, if you would like to profit from rising gold prices using leverage, you can refer to trading futures.

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