Sold in the form of wafers, bars, coins, investment retirement accounts (IRAs) and exchange-traded funds (EFTs). Investors have long bought gold to offer a measure of protection from the risks of inflation and market volatility.
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With inflation still well above the Federal Reserve’s target of 2%, many experts predict a big year for gold in 2024. Gold is in hot demand as an investment, a status symbol and a key component in many electronic products.
“When inflation rates rise, gold prices often increase as well,” Gold IRA Guide analyst Liam Hunt tells MarketWatch. “If current trends of economic uncertainty and inflationary pressures continue, there could be upward pressure on gold prices.”
Almost everyone is hedging that gold will rise next year, with some analysts predicting values to reach a bullish $2,300 per ounce (it’s selling at around $2,035 today), says CBS News. But what about gold makes it such a long-term, safe investment? Here’s five reasons gold is a good bet during economic turmoil.
An Inflation Hedge
Gold is often seen as a hedge against inflation. During periods of rising prices, the value of fiat currencies (those not backed by a commodity, like gold or silver) may decline. Still, gold tends to maintain its value or even appreciate.
“Gold is the best hedge there is and every portfolio,” says Collin Plume, founder of Noble Gold Investments. “We have an average of an economic downturn every 5.5 years. Each time a downturn happens, you need that one asset that will keep you buoyant while you wait for the rest of your portfolio to recover.”
An Historical Store of Value
The value of gold has been on an upward trajectory over the last century. As the United States Gold Bureau notes, in contrast to the declining value of the U.S. dollar over time, gold’s value has “exploded.” Throughout history, gold has retained its purchasing power, making it a reliable asset during economic uncertainties.
Diversification
Think of gold as the outsider in your portfolio. The whole point of diversification is to include assets from different classes that aren’t correlated to help reduce overall risk. The relation between gold and stocks is essentially zero.
A Global Acceptance
Recognized and accepted globally, and not tied to any specific country, gold is a universal store of value that can be easily traded or converted into other assets. NPR calls gold an “old-school investment.” But global demand for the precious metal increased 20% last year and its value sits at a decade high.
A Limited Supply
With the supply of gold being relatively limited and new discoveries becoming rarer, this scarcity can contribute to maintaining its value over time. In 2020, the BBC reported that we might have already reached peak gold — “the point when gold production is no longer growing, and the mining industry cannot meet rising demand,” per Forbes. Seen as a limited commodity, gold’s value might continue to increase beyond anyone’s expectations.
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This article originally appeared on GOBankingRates.com: Gold Prices To Skyrocket in 2024 — 5 Reasons It’s Such a Safe Investment During Economic Turmoil
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