Over the years, as the global economy has grown in reach and output, making ideal investments has become vital. Whether it is an investment in human capital to assist in the development of society or investing in securities to achieve one’s financial objectives, choosing the right course of action is necessary.
Putting in the time, effort and resources in the right places are important for one’s own financial investments. Especially, when the investment landscape is shrouded in a veil of uncertainty like it presently is. The rising prices of crude oil, Russia’s invasion of Ukraine, risk-averse market sentiment and the global economy’s reaction to the happenings in the world have led to the financial markets becoming volatile across the globe.
So what kind of an approach does one adopt in times of uncertainty in the markets? Is there an investment that will safeguard your funds against risk? Can an investment give positive returns even when the financial markets are down? Read on to find answers to all these questions and find out why putting your money in gold is the best investment you can make right now.
A look back in time
The financial markets have seen as many downs as there have been ups. Since the first stock market was set up during the early 1500s, the world has seen numerous historical events that have impacted the markets. Multiple wars, economic depressions and multiple disease outbreaks have often let the bears take control of the bulls.
However, even during these times of great uncertainty, one particular investment has exhibited extraordinary resilience. Investing in gold has become a staple for all of us. No historical event has been able to dull the precious metal’s sheen. Not only has gold held its own exceptionally well against financial securities like stocks and bonds, but it has also shown through whenever the markets have succumbed to the bears.
Even when the threat of the COVID-19 pandemic spread over the entire world and the stock markets crashed, all gold-backed securities preserved their value exceptionally well. In 2022, with the Russia-Ukraine crisis at its peak, investors are once again betting on gold. With the markets range-bound and volatile, the precious metal has once again proved that all that glitters is not gold.
What makes gold the best investment?
There are multiple reasons why the precious metal is the investment of choice for many people. While some of these reasons are dependent on preference, others have a more statistical basis. Here is a list of reasons which make a compelling argument for investing in gold.
Gold Has Maintained Value
As we mentioned previously, even after multiple events have shaken the global economy over the years, gold has been incredibly resilient in holding its own. It stores value and passes it down from generation to generation — making it a popular investment. As an investment option, gold is particularly good in times of economic downturn like we are experiencing right now because whenever the markets fall, gold prices rise.
Hedging Against Inflation
First, with the COVID-19 pandemic disrupting supply chains across the globe, and now with the Russia-Ukraine conflict inflating oil prices, prices for consumer goods are set to rise. This phenomenon is called inflation. Although it is a gradual process, the pace has accelerated significantly because of what has happened in the past two years. During periods of high inflation, many currencies face erosion in value with respect to gold prices. This ensures that gold is an excellent hedge against rising inflation. For investors looking to preserve the value of their money, buying gold is the right choice.
With the markets becoming increasingly volatile every day, portfolio diversification is the need of the hour. As gold has a negative correlation to many other asset classes, it is the perfect investment for individuals looking to diversify their portfolios and mitigate losses. Gold offers protection to your investments as many macro and micro factors have a negligible impact on gold prices.
Most gold investments do not have a lock-in period unlike many mutual funds and insurance schemes. Investing in gold ensures that investors can have their money back whenever they need it. High liquidity is a good thing to have in any investment. Investing in gold ensures that your funds are available when you need them.
Security in Times of Geopolitical Crises
Gold is called a crisis commodity as it provides security against both financial and political crises. The price of gold appreciates during geopolitical instability and uncertainty when the value of other assets usually depreciate. This benefit of investing in gold has gained relevance in the past few years, and for the current geopolitical scenario, one cannot go wrong with an investment in gold.
How to Invest in Gold
Hope you have understood why is gold the best investment to make in today’s day and age. Let us look at some options through which we can invest in gold.
Investment in physical gold is made either in gold coins and bullion or jewellery. No additional charges are levied in the case of coins and bullion, but jewellers often levy making charges. While this is the most popular form of investing in gold, it is also the riskiest. The risk of theft is always present. Having said that, it is the easiest way to invest in gold and requires no paperwork.
Exchange-traded funds or EFTs mimic the movement of asset pricing in real-time. Investing in a gold ETF is akin to buying gold in a dematerialised form. The gold is stored in the investor’s demat account and can be bought or sold at a moment’s notice. This form of investing in gold is highly liquid, has no additional charges, and is suitable for investors who do not have huge capital.
Gold Mutual Funds
Similar to investing in gold ETFs, gold-backed mutual funds also allow investors to buy gold in demat form. However, this is not a suitable option for small investors as these funds often have a lock-in period and also levy additional charges. Gold funds are not affected by the real-time changes in gold prices, are free from the risk of theft and require some paperwork to go ahead with.
Sovereign Gold Bonds
Sovereign Gold Bonds are the safest way to acquire virtual gold since they are issued on behalf of the Indian government by the Reserve Bank of India and pay an annual interest rate of 2.50 per cent. The bonds are measured in grams of gold, with 1 gram as the base unit. These bonds have an eight-year tenor and an exit option starting in the fifth year. It’s another hassle-free option to invest in gold since you have ownership without having to own it physically.
Digital gold is a cutting-edge investing tool that allows you to buy 24 Karat pure gold that is stored in safe vaults under your ownership. You may exchange digital gold for 24 Karat gold coins and gold bars if you want to take hold of it. You can purchase it quickly and effortlessly from the comfort of your own home. The minimum purchase or sale price is Re 1. Digital Gold can be bought and sold 24 hours a day, seven days a week, including weekends and holidays.
Gold has always been a safe investment, and it has reinstated that claim in recent times by staying in the green even after the bears took over financial markets across the globe. Being an excellent store of value, highly liquid and extremely safe option, investing in gold is the best investment you can make right now! So buy some gold this year and make the most out of your money. Happy investing!