Why Invest in Gold in Times of Uncertainty?
Investing in gold has long been considered a reliable strategy for diversifying an investment portfolio and hedging against economic uncertainties.
Gold, often referred to as the “safe haven” asset, has maintained its allure for investors throughout history due to its intrinsic value and stability.
Here’s a closer look at why investing in gold can be a wise investment.
- Preservation of Wealth:
Gold has been valued as a form of currency and a store of value for centuries. Unlike currencies that can be devalued by inflation or economic instability, gold has maintained its purchasing power over time. This makes it an attractive option for investors looking to preserve their wealth and protect against currency fluctuations.
- Safe Haven Asset:
During times of geopolitical tension or economic uncertainty, investors often flock to gold as a safe haven asset. Gold has historically performed well during periods of market volatility, serving as a hedge against stock market downturns and currency crises.
Its price tends to rise when other asset classes, such as stocks or bonds, experience declines, making it an effective diversification tool for investors seeking to reduce portfolio risk.
Including gold in a diversified investment portfolio can help spread risk and mitigate losses during market downturns. Gold typically exhibits a low correlation with other asset classes, such as stocks and bonds, meaning its price movements are often independent of broader market trends. By adding gold to your portfolio, you can reduce overall volatility and potentially improve risk-adjusted returns over the long term.
While there are several benefits to investing in gold, it’s essential to consider the potential drawbacks as well:
- Lack of Income:
Unlike stocks or bonds that generate income through dividends or interest payments, gold does not produce any cash flow. It is essentially a non-yielding asset, meaning investors rely solely on price appreciation to generate returns. As a result, gold may not be suitable for income-focused investors or those seeking regular cash flow from their investments.
- Price volatility:
Its prices can be highly volatile, experiencing significant fluctuations over short periods. While gold is often seen as a safe-haven asset during times of economic uncertainty or geopolitical instability, it is important to note that gold prices can also exhibit volatility even in stable market conditions. This means that even when things are relatively stable, gold prices can still experience sharp declines or sudden drops, potentially resulting in substantial gains or losses for investors.
- Local versus international gold price: There are three factors that would result in a delta between international gold price and local price
- Currency exchange risk: Fluctuations in currency exchange rates can affect the local price of gold when converted from international prices. Variations between official and black market exchange rates can impact the final local price of gold.
- Supply and Demand: The local supply and demand dynamics for gold can affect its price. Local factors such as jewelry demand, investment demand, availability of gold supply, and local production can influence the local price of gold
- Relative local economic outlook: The economic conditions and outlook of a specific country can also impact the local price of gold. Factors such as inflation rates, interest rates, economic growth, political stability, and investor sentiment can influence the demand for gold within the country.
Investing in Gold on Thndr
If you’re looking to invest in gold on Thndr, AZG is available. This fund was launched in partnership between Azimut Egypt, a leading investment manager, and Evolve Investment Holding, specializing in gold and precious metals. All funds in AZG are invested in RJC-certified 24-karat gold, ensuring investment-grade quality.
Want to know more about how to invest in AZG check out this article
In short, investing in gold can help protect your wealth during uncertain times. Its stability and historical significance make it a valuable addition to any investment strategy. While it may not generate regular income, gold’s ability to preserve wealth makes it an attractive option for investors looking to hedge against market volatility and inflation.
