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Buying physical gold, no matter how little the amount, can protect wealth and reduce the risk of market shocks. The money that people put in their wallets can lose its value when there’s high inflation. Stocks, on the other hand, can become useless when the company offering them files for bankruptcy. Gold, however, will always be valuable even if its prices are often volatile.
Saving money and investing in securities are good moves, but people should not forget about the precious yellow metal. Here are three reasons why veteran investors keep a small portion of their assets in gold.
Its Prices Can Never Go To Zero
Gold has always been used as a commodity for trading products and services. Its value never went zero in the past and it never will because of two reasons. First, it has intrinsic value. When you burn money, it becomes useless. Gold, on the other hand, can be used for other things when it’s melted. Second, unlike fiat currency, gold cannot be reproduced out of thin air. The precious yellow metal is only limited to how much the miners can produce, meaning it can only become more valuable over time especially when the supply cannot keep up anymore with the demand.
Gold retains its value not only when the dollar is weak but also in times of geopolitical uncertainty. When a foreign country invades a nation, that nation’s currency falls and can never be used in any part of the world. The people living in the invaded country can only rely on things with intrinsic value for the exchange of products and services both locally and abroad. BullionVault says that the very reason why Germany made gold investments overseas in the first place is because of fear of an invasion from the Soviet Union. Today, thanks to the advancements of investing, people don’t have to physically go to another country anymore just to purchase gold. Investors can simply use the internet in order to buy the metal and transfer their reserves from one vault to another.
It Handsomely Rewards Those Who Wait
Gold prices today weren’t that high 10 years ago. Today, an ounce of the precious yellow metal costs around $1,170. In 2005, gold was merely at $450. Those who have made gold investments in 2005 would’ve made a profit of $720 per ounce of liquidated gold today. Although a $720 profit per ounce after 10 years is little compared to the returns of a successful stock, it only shows that gold’s value increases overtime and people can profit from it. Besides, the precious yellow metal is better invested in the long-run and should only be liquidated in times of emergency.
Gold is something that people can safely store away knowing that it is something of value that they can pass on to their offspring. A 5% allocation of assets in gold may look small but it can come a long way when it’s the only thing left of high value.