Gold- a precious metal that everyone knows about. You can own gold in various forms- physical, e-gold, gold-focused mutual funds, etc. The value of gold always keeps changing and sometimes this change is very large. It also has a reputation for doing poorly when the stock market is soaring high. Because of these reasons, many term gold investment ‘risky’, which is not true. Using gold as a part of a larger, diversified plan is not only safe but can ensure a high return as well.
Here are some of the reasons why gold is one of the safest investments in early 2020:
- Shield Against Inflation:
Since gold retains its value, it is considered to be a great hedge against inflation. When inflation hits, financial assets like stocks and currencies lose their value a bit as their purchasing power declines. Since gold is a hard asset, it is expected to hold up in an inflationary environment. Some experts think that inflation is expected to increase in early 2020, making gold more popular.
- It’s a Safety Trade:
Because gold is a hard asset, it is viewed as a safety trade. Most of the currencies, like USD and INR, are called fiat as they are not backed by anything except the government’s promise. Gold is considered to be more valuable than any fiat currency and is popular among investors seeking safety.
- Stock Market Uncertainty:
The stock market follows a dynamic trend. You can never guess when the graph will rise or fall. When the stock market is falling, hard assets such as gold provide a safe and defensive play for investors. Gold can maintain an upward trajectory even when the share market is falling.
- Falling Interest Rates:
Since no interest is paid in gold investments, many investors prefer other investments over it. Stocks, bonds and savings accounts offer more interest which has made gold to lose some of its lustres. When these rates fall, as they have been recently, gold investment becomes popular as the rest fail to pay returns.
This precious metal acts as a diversifying investment no matter what the environment of the market is. When other investment markets fall, gold rises. This can, in turn, help you smooth out your investment portfolio’s long term performance. Owning financial assets that move in different directions can help dampen the volatility of your portfolio.
Therefore, gold is a safe investment in early 2020. You can invest in gold coins, jewellery, e-gold, gold ETFs, etc. and expect only profit. Motilal Oswal is one of the best companies that lets you invest in gold and digital gold easily. It is also one of the best stock investing apps in the country. Be a part of Motilal Oswal and diversify your investments.