Gold has been a symbol of wealth for centuries. The shiny, radiant metal has been used in jewellery, art and artefacts — treasured for its beauty and status — as early as 3000 BC. When the first gold coins appeared around 550 BC, gold became currency, and it’s been uniquely valuable ever since.
And good value is especially important in times of market uncertainty. Gold is considered to be a hedge against inflation, market volatility and currency weakness. When a potentially turbulent market looms, gold often becomes a go-to “safe” investment.
Regardless of the market state, gold is rich with benefits.
Gold maintains its value
As with any commodity, the price of gold can fluctuate. However, historically the price of the previous metal has remained relatively stable. Stocks and bonds can be highly volatile — their value can swing and sway unpredictably — whereas gold keeps its value. Even during the COVID pandemic in 2020, when the economy took a beating, gold prices continued to increase, hitting the highest value in history ($2,074.88 per troy pound) in August.
As with most items of value, if there is a limited quantity of something, it tends to stay in demand. And in periods of higher demand — such as economic uncertainty, population growth and emerging markets — the price increases.
[Read our blog: Types of gold you can sell]
Unlike paper currency, which can be printed as needed, there is a finite amount of gold on the planet. According to the World Gold Council, an estimated 201,296 tonnes of gold has been mined from the earth, with another 53,000 tonnes in identified underground reserves. There’s only so much gold to go around, which keeps it in demand, and increases its value.
Another benefit: Gold is pretty much indestructible. How’s that for a safe asset?
Gold works against inflation
Gold can also act as inflation protection, and that can be good news for your investments. Inflation reduces the purchasing power of money; gold preserves that power. Because gold behaves inversely to inflation, and its value remains stable, it can be an effective “hedge” (an offsetting position) against currency fluctuations.
Gold is also a non-correlated asset. This means its value is not directly affected by the stock market or other investments, or interest rate decisions. Instead its future value is tied to price speculation and not earnings or dividends.
What this all means: The factors that cause the value of money to decrease do not directly impact the value of gold. When money’s value decreases, gold’s value actually tends to increase, which makes it an attractive investment during uncertain economic times.
Interesting fact: Gold saw an annual average return of 9.7% from 2000 to 2020. This time period included the 2008 recession, among other impactful economic events.
Financial experts typically advise that investors keep a diversified portfolio to ride out high inflation and turbulent markets. Yes, stocks and bonds typically outperform gold in the long run, but gold, which is more stable, can still come out ahead. Gold prices often increase during economic uncertainty, which in turn balances out other losses.
[Read our blog: The Ten Most Valuable Coins in the World]
Gold is a physical asset
You can’t see most investments; typically they’re represented by numbers on a screen. That’s just the way investing works. However sometimes a physical asset simply provides more peace of mind.
With gold, you can hold it in your hand, and that tangible presence can provide a feeling of financial security — it’s similar to real estate. There are also some real benefits to investing in physical assets.
First, gold is a low maintenance investment. Whether in coins, bars or jewellery, all gold requires is safe storage space. A security deposit box or home safe are perfect places to safeguard your stash. It’s also low fraud, can’t go bankrupt or default on promises, and is unhackable.
[Read our blog: What Makes a Good Coin Investment?]
Gold is also easy to buy and sell — it’s a highly liquid, although scarce, asset. You can purchase or liquidate your gold at a jewellery store or accredited gold reseller or recycler, or via retail websites. It’s an ideal investment if you need to access cash quickly.
Gold can also be passed on as a family heirloom, typically in the form of jewellery. Golden rings, bracelets, necklaces and other items can be given to new generations, while the value stays intact.
Gold is a comfortable, stable and generally safe investment. It holds its value, protecting your wealth and purchasing power over time, and can act as an insurance policy during economic uncertainty. It’s also beautiful, in all of its forms.
If you’re curious about how you can buy or get cash for your gold, we can help. Reach out to Century Stamps & Coins and book an appointment for a free appraisal at our coin shop, which serves Mississauga and Toronto.