I see many people across the internet ask many questions about gold.
The power of gold is certainly real, and I will be explaining why it is a safe haven in times of crisis.
But first, I want you to imagine there is a global crisis happening right now. And if you can’t do that just think back to the first time you heard about Covid-19. You may have heard of it in the news, maybe from a friend or on social media.
Now think about how the economy dwindled sharply after that without proper forecast and future analysis for the stock market.
How about the commodities you thought would protect the value of your currency?
With no warning and predictive analysis of the outcome to follow a global and devastating crises like the one experienced not too long ago, most people thought about two things:
- Am I safe?
- Are my life savings and investments secured?
Sadly most of you saw your ‘trusted’ means of investments dwindle with the economy as the value of your currencies hit all-time lows.
But what if I tell you that while your investments were playing games with you in the heat of all the crises, some people were basking in the safe haven of a commodity they trusted- Gold.
When big investors like George Soros said, and I quote, “The U.S. dollars is very weak. Investors are moving to other assets”, he definitely was not kidding.
Experts will always advise against having portfolios that are controlled by the same factors in an economy. They always buttress on the need to have a diversified portfolio.
In the late1970’s and early 2000s, the financial market was favorable for gold, but other stocks suffered greatly. Similarly, in the 1980s, the gold market saw a great loss while other stocks rose greatly.
With the volatility of the factors that affect the performance of an investment or its ability to hold value, its independence is probably one of the greatest attributes to its unique performance especially in times of crises.
Why gold is considered as a safe haven and why it should be considered as such to you.
Well let’s just put it in the words of Michael Avery who owns billions of investment in gold’s. He said,
“In 5000 years of human history, gold has been the currency of choice, the store of value, when humans have called into question their government’s effort to solve problems by running printing presses and injecting money into the economy.”
For Michael Avery, gold Investment is not a new thing however, something he ventured into over years when he had seen the prospect of the commodity.
And because of billionaire investors like Michael, and other heavy individual and company investors who just like Michael realize the prospect of this commodity, gold is estimated to keep rising in value over years.
You can already guess that the law of demand and supply plays a major role in determining the behavior of a commodity. In the case of gold, the more investments is pumped into it, the higher its value.
While you’re also busy hoarding your dwindling and unstable currency, the banks that you trust with your money, the assets you invested in and the government were stocking up heavily on gold to preserve its currency value.
In just 10 years the world official central bank holding’s has increased from 28.5 Metric tons(which weighs about a 1000 times more in kilogram) to 33.5 Metric tons as of 2019. And now the amount of gold it possess is a whooping**
Let’s go back to the heat of any global crises, in the case the Covid-19. People want a place to safe guard their currency value and although there are a lot of options everywhere, the safest and the option that individuals, organizations, governments and corporations end up taking is investing in gold bullion.
The U.S.A alone hoards the highest amount of gold with countries like Germany, IMF, Italy, France and China following right after. Russia, Switzerland, Japan and the Netherlands follow right after and these countries make up the top 10 gold hoarders in the history of the world.
At this time, because there is a bullish increase in the demand for gold in the midst of the crises, the price of gold rockets. So it not only preserves your currency value. If you’re smart enough to invest at the right time, it gives you larger return compared to your initial capital.
With this I’ll show you just how gold performed through the covid-19 that struck.
Why people buy gold in times of crises
Yet, some of you still want to know why people buy gold in times of crises?
It is for reasons such as what we have just explored above. It’s how the price of gold seems to preserve its value and even rise amidst crises.
And for some other reasons that we are going to right now explore.
The fact that Gold is a real asset makes it a more than often a very desirable commodity to possess. Trust me during a crises, you want nothing more than to know that you have an asset that is tangible. One that is probably sitting somewhere in bullion bank or encrypted with a lot of security whilst preserving the value of your currency. What can be more assuring!
The fact that you can decide to either buy physical gold or paper gold makes it more desirable and attainable.
- Physical gold is a real long term investment asset and can be bought in bullions. However, it needs to be properly stored and that incurs a fee.
- Paper gold is an asset that reflects the price of the actual gold. It is a great option when you want to buy in smaller quantities and for a smaller value.
There is no limitation when it comes to buying gold. Of course, not everyone can afford to buy gold bullion at the current value it holds. That is why paper gold is the best option for buying gold in smaller quantities and for smaller value. Whichever you decide to buy still preserves your interest.
Like we already saw in the likes of billionaire investors like Michael Avery and George Soros, there is a rising demand amongst stockholders and new investors in gold. The potential of gold as a prospective commodity is being realized by more and more companies, organizations, individuals and corporations.
Jim Rodgers, a millionaire investor even said:
“Gold will be the great investment over the next decade”,
– And when Eike Batista, another billionaire investor, said
“There is a massive shifting of wealth to new economic powers”, he was referring to the commodity- Gold.
Companies like Warren Buffet’s Berkshire Hathaway, Investors and shareholders like George Soros and John Paulson are abandoning the stock market. Warren Buffet’s Berkshire Hathaway released 96% percent of their Johnson and Johnson shares and about 97% of its Kraft Foods Group.
With this wave of realization and the pumping of investments in gold, the value of gold is estimated to keep rising as more investors, banks and even the government hoard this commodity.
Also in the history of the asset, gold, it has experienced a constantly increasing purchasing power as compared to other currencies such as the US dollars. Probably due to the fact that the US is in $23trilion worth of national debt. And it would only get worse over time.
This is why Marc Stern who holds $550 million of Bessemer said,
“At the core of the sharp downturn is an absence of confidence. Rising debt levels in Europe and the U.S., uncertainty about policymakers’ willingness to restore fiscal order, and increasingly cautious corporate sentiment that is consistent with slowing global growth are the chief culprits.”
However, the purchasing power of gold is relatively stable over the long run but within a short period, may vary greatly.
How much is too much?
It is one thing to want to invest in an asset such as gold, and it’s another thing entirely when it comes to investing.
Most people wind up with questions such as,
“How much percentage of my portfolio should I allocate to gold?”
I had an investor once ask me directly,
“Do I allocate all my resources to gold during a global crisis?”
The answer I would give anyone in this context and the only answer that would probably set up the basis on which your future investments are going to lie is that before you can invest in a commodity such as gold, you must be well grounded in the risk associated with it.
There are risk factors associated with any investments, and you must be well versed with these to make such an important decision as to the percentage of your portfolio to invest in any commodity.
In this vein, we’d be assessing the risk factors associated with investing in gold
There are five factors one must consider before investing in any commodity, and they are:
Investments are risky but having a strong foundation is very essential for it withstand market instability and other factors.
Gold bullion have a very solid foundation and that is one of the reasons why it is able to withstand deflation and a downward spiral of the economy.
Unlike most commodities, the security associated with gold is very high. Like we discussed earlier, gold can actually be bought in two ways, physical gold and paper gold.
Because gold has no counterparty risk, it means that physical gold cannot be bankrupt and bullion gold cannot default on obligations.
When it comes to speculations and growth for this commodity, it is difficult to make futuristic analysis or properly analyze the growth trend of this commodity and so it is difficult to make predictions about its performance.
Finally, it all comes down to you to make the final decision. Keep in mind your need for a diversified portfolio. This means you are not going to invests all your asset in gold- obviously.
In the words of M.G. George Muthoot, “If this business was as easy as it sounds, all my branch managers would be setting up their own gold loan companies.”
Experts suggest that you invest 10 – 20% of your liquid assets and not your overall portfolio.
However, you can weigh the risk together with the opportunities associated with this commodity.
Then decide just how much of your portfolio you should invest in gold especially during the time of crises.
You’ve made it to the end of this article! That shows that you’re excited to begin your investment journey.
To start your investment journey and learn more on how to invest in gold, you may also check this website:
Remember that when it comes to gold investing, time is an essential factor. It just takes one major economic/political event (often unpredictable) for prices to skyrocket. It is for this reason that you must act now!
I hope you enjoyed reading this article. If you did, you could always get more information about gold investment from our website.
Do have a golden experience.