Investors have different options for gold investments. Whether it is ETFs or buying physical gold, the investors have several choices to make for investing in the royal metal. The purpose of buying gold is clear to many of them and the lucrative investment in the gold market might appeal to many. In the modern world, there are very fewer people believing in holding real gold. It is a material used in jewelry but instead of collecting it physically, people tend to use it as a paper currency. Gold is actually an asset and investors do believe that it creates a hedge between the inflation and the decreasing rate of interest.
The gold market has been in trend for last many years. It is believed the Egyptians started forming jewelry but it was followed as a currency after 560 B.C. Once it started getting involved in trading, the creation of gold coin came out as a solution. Since then, gold has been widely recognized all over the globe. In the year 1066, Great Britain developed its metal-based currency and the British pound was based on the representation of the gold or silver amount. The symbolization of gold then started being followed in other regions of the world.
In the 90s, there were several changes made in the monetary system and the system of notes started which was redeemable with gold. The United States abandoned the gold standards in 1971 when its currency levels were ceased to be backed by gold.
Importance of Gold in Modern Economy
Gold is independent of the US dollar and other currencies, but it still holds a huge importance. It is very essential for the global economy with importance in central banks and the organizations like the International Monetary Fund. At present, the gold-related organizations hold 1/5th of the world’s supply above-ground gold. There are several banks presenting gold reserves to reflect their stable position in the global economy. Gold has preserved the wealth for a thousand of generations and it has a better holding value than the paper denominations.
Taking a small example, in the previous years, if the paper denomination of $50 was used in buying an ounce of gold, its value would have been the same. However, if those $50 and gold bar were kept till the same date, the amount of gold bar would be much higher at present. The value of paper currency gets eroded by inflation but gold becomes a hedge against the increasing inflation rate.
• Gold preserves wealth
Gold preserves wealth and has a good position in the today’s environment. It is a good option to battle the rising inflation. Even the history reveals that fold has served as a wall against the scenarios of rising inflation. The price of gold revolves in US dollars on a global basis. Investors looking at the purchase of fold on global grounds must sell their dollars to buy it. As the US dollar weakens, the gold becomes cheaper for the investors holding other currencies. It increases the demand from the investors holding the currency which appreciates relative to the US dollar.
• Safe Investment
Gold is relatively a safe alternative to the political and economic uncertainties prevailing in different regions of the world. Investors look at it as a safety measure to undertake during the uncertain phases. Gold is indeed the commodity to escape from the qualms occurring in the world.
• Diversifying Investment
Gold has a strong history and present. It adds to a diversified tag to your portfolio. Whether you worry about inflation, US dollar rate fluctuations or the protection of wealth in a safe way, gold is a protective measure against all these issues.
• Gold pays dividend
Gold stocks are quite appealing to the investors who wish to get growth over their investment. The related stocks will grow and fall with the fluctuation in gold prices but there are many mining companies having a profitable outlook even when the gold prices are down. Even a smaller increase in the gold price can result in significant gains in the stocks and generate better ROI to the paper-owners of gold than the physical gold owners.
The investors focusing on the growth of their investment can benefit from choosing gold stocks. It does pay dividends when gold shows some fluctuation. It is a relatively strong investment than the non-dividend-paying stocks. The overall scenario remains positive for the gold owners.
The gold mining sector includes the companies working on identification and extraction of gold is volatile. The dividend performance of gold companies depends on its performance over time. The company’s history and sustainability of the dividend payout ratio examine its financial statements.
There are many companies having the ability to sustain the high dividend payouts. These payouts increase with the ability to show the improvement in settling debts and having on-going cash flows. Every company goes through different financial cycles and the long-term figures matter more than seeking the shorter financial representation.
Owning Gold in Different Ways
• Gold Future & Option
• Gold ETFs
• Gold Company Stocks
• Gold Coins
• Gold Bullion
• Gold Jewelry
Good & Bad time to invest in gold
There are many debates held on a regular basis about the performance of gold in comparison to the other investment modes. In fact, it has underperformed in comparison to the other modes of investment. The best time to invest in any asset is when it is relatively less expensive and people establish negative sentiments over it.
There are pros and cons to every investment. If you can’t handle physical gold, there is an option to buy stocks of the gold mining companies or the ETFs for a better scope. If you believe that gold is a good opportunity to combat inflation, you can think about investing in any option related to gold. The future markets are always a great option for the people having good predictions about gold. There are risks involved in all types of leverage-associated holdings but some investments are worth taking a risk.