Timeless Allure of Gold

1st June 2018

For thousands of years, gold has been coveted and considered special, and has been bought, traded and stored as wealth for generations, around the globe. To date, approximately 190,040 tonnes of gold has been mined since the beginning of civilisation, and there is still around 54,000 tonnes of gold reserve below ground.

Gold is considered so precious that unlike other commodities, nearly every ounce of mined gold available on earth, is in human possession. Of the total gold above ground stock available today, 90,718 tonnes (47.7%) is used within the jewellery sector. Yet, despite its popular use for necklaces, earrings and rings, it has other diverse purposes within other sectors ranging from electronics, dentistry, and the space industry. It is easy to see that the diversity of demand for this unique metal, fortifies gold’s qualities as an investment asset.

What are the many advantages of investing in gold?

Increasing Demand

Gold has maintained a history of holding value. It is regarded to as the ultimate safe haven. Within the last five decades, the volume of gold generated each year has tripled, and the annual amount of gold purchased has quadrupled. Particularly in countries such as India, Germany and China, the demand for gold has increased considerably. In china, gold is often gifted, whilst in India it symbolises wealth, and is used for many marital rituals. Since 2001, the demand for gold has increased by 18% per year.

Portfolio Diversification

Gold is ideal for portfolio diversification because it displays either no correlation or negative correlation with stocks and other asset classes. Investors who invest in gold, do so, to reduce the overall volatility and risk.  During the 30-year period from 1985-2015, gold’s correlation with the S&P 500 was -0.07, and with the FTSE 100 it was -0.05. Such numbers are ideal for diversification. They show that the price of gold has not determined by what happens in stock markets; and if there is any relationship, it is a marginally negative one, meaning that when stocks fall, gold is more likely to rise than fall.

Inflation

Historically, gold has proven to be an effective hedge against inflation. As a country’s money supply increases over time, prices rise and the value of currency (or what that currency can buy) falls. By putting their money into gold, however, investors can preserve their purchasing power for long periods of time, as in the last few decades, when the stock market plunges during high inflation periods, the prices of gold rockets.

Deflation

It’s a hard, tangible asset. That means if investors lose confidence in the financial system during periods of market distress, they can at least rely on gold to maintain its value – a quality which the metal has exhibited for thousands of years. Indeed, when most markets collapse, the price of gold, in contrast, often heads higher as a way of avoiding counterparty failure. During the global financial crisis between October 2007 and March 2009, for example, the S&P 500 lost 57%, while gold gained 26%. 

If you’re thinking of investing in gold or other precious metals, then why not check out the options that Royal Mint Bullion have available? From physical to digital, there is something for everyone, no matter what your investment goals may be. For more information, visit royalmintbullion.com.

 

*At the time of publication this information is correct. Please note we are unable to provide financial advice, so we recommend that you speak with a financial advisor regarding your options. 

 

Sources

https://www.forbes.com/sites/keithweiner/2014/04/01/what-makes-gold-totally-different-from-everything-else/#211de76b451a

https://www.gold.org/about-gold/gold-supply/gold-mining/how-much-gold-has-been-mined

https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp#ixzz5F6xIfnYJ

https://www.gold.org/about-gold/gold-demand

https://www.gold.org/about-gold/gold-demand/geographical-diversity

 

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