While gold can help raise the balance and provide hedging for some investors, there are also risks to watch out for. The truth is always somewhere in the middle, and in this case, the truth is rooted in a wide variety of factors that include your investment goals, time horizon, and ultimately your investment strategy. And as Dave says: “Since the Roman Empire, gold has never been used as a medium of exchange for a collapsed economy. In addition, gold is seen as a good store of value, so people may be encouraged to buy gold if they think their local currency is losing value.
Over the past 50 years, investors have seen a rise in gold prices and a slump in stock markets in years of high inflation. Other options include investing in an exchange-traded gold fund (ETF) or buying shares in mining companies involved in extracting and producing the precious metal. So if you decide to invest in gold because you think you’ll “be smart” when the dollar gives way, you may have simply flushed your money down the toilet. One of the benefits of owning shares in gold mining companies is that you can earn dividends unlike any other type of gold stock.
Gold and silver prices are so unstable (and have been over time) that in an economic crisis, they would only be useful to hope that someone will take your silver coins or watch and exchange a pack of toilet paper or a can of gas in return. For example, you can invest in physical gold by buying the gold coins or gold bars mentioned above, as well as gold jewelry. Both gold and silver have occupied a place in the economy for almost as long as there have been commercial activities. This is because when the fiat currency loses its purchasing power due to inflation, gold tends to be valued in those currency units and therefore tends to rise along with everything else.
The precious metal has retained its value in the past, making gold a useful hedge against inflation. This means that you have a third allocation to gold when the price rises but leave that position when it falls. Finally, gold can add an important level of diversification to your portfolio, as gold prices have historically been negatively correlated with other asset classes. Investors have found that gold tends to regain its value relatively quickly due to the inevitable market volatility.
Around 60% of gold demand comes from the jewelry, electrical and medical industries, and this demand is relatively stable.
