Why is gold so stable? What makes gold so resilient to economic fluctuations and market turbulence? What keeps the price of gold at its highest all throughout the year? The answers to these questions are not easy to come by. After all, no one can predict the future, and as investors we cannot rely on anything that they claim is going to be true. However, there are a few facts that we can all work towards if we truly wish to understand the answers to what makes gold so stable.
The Relationship Between Gold and Inflation
The first fact that we need to understand is the simple relationship between gold and inflation. Inflation is what robs money from its intrinsic value. As we all know, the value of money will depreciate over time. If we want to have a secure source of income, then we must learn to protect the value of our assets like gold.
With respect to gold, inflation will always stay a threat because gold is highly correlated to monetary policies. The purchasing power of money will depreciate over time, forcing people to turn to other sources of income such as savings accounts, derivatives, and the likes. It is important to remember that all these measures of inflation do not affect gold. Therefore, it is not surprising that the purchase of gold is relatively safe during times of economic crisis or when the purchasing power of money is on the decline.
Gold is deflationary and is always in supply deficit
Another factor that is related to gold’s stability is the relatively low amount of supply compared to the number of people demanding for it. In the past, the gold market relied mainly on government intervention to keep the level of demand at acceptable levels. As you may know, central banks around the world intervened in the gold market to control the rate of supply.
Today, the Internet is one of the main sources of information about the price of gold. There are several web sites that display real-time data on the price of gold.
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Gold has been the most consistent asset through economic hardships
Perhaps one of the most important questions that must be addressed is why gold is a practical investment during times of financial uncertainty. If you think about it, there is no physical product that is more secure than gold. After all, no currency can safely be placed on physical gold. It is true that the prices of commodities like oil, rice, or pork are likely to fluctuate, but gold cannot be affected by the volatility in those markets. Gold has the special property of being able to maintain its price level regardless of external factors. You don’t have to worry about your future consumption in case the economy suffers serious turbulence; you can simply count on the fact that gold will always be there to save you from any unpleasant situation.
At this point, you might still be wondering what makes gold so stable, despite the uncertain economic conditions. The answer is simple: gold plays the role of a universal currency. Unlike paper money, gold does not lose its value regardless of the state of the economy. People have been investing in gold since centuries, and it is not surprising that they continue to do so today.
One of the reasons why gold is so stable is the fact that it is rare and thus becomes more valuable over time. Right now, the demand for gold is very high, and this means that the supply is also high. There are only around 4 million ounces of gold produced each year, which is significantly lower than the quantity of 9.6 million ounces that are created each year. If you consider the fact that gold is needed by governments around the world in order to back their currencies, then you can see that this aspect makes gold more secure than other precious metals. In addition to this, you also have to remember that gold is a form of investment, because it will never lose its value. Investing in gold can give you excellent returns, making it a perfect way to manage your finances at the security level while achieving a bit of growth.
The choice to buy gold is not as cut and dry when you move away from it’s core benefits. When the buying process is more personal and is correlated with your own financial situation, things can become a little more foggy for the investor.
4 simple questions top help start the process
So lets run a quick 1 minute workout to save you some time.
Are you over the age of 70?
Do you have over $5,000 worth of investable capital that you will not need in the immediate/short term?
Do you have an eligible IRA to rollover?
Do you have trustworthy advice?
This exercise was not meant to give a definite answer. At Best Gold Investment Review we do not give individual financial advice. We do want you to be asking the right questions and receiving the right answers. If you need any of these answers validated by a specialist we encourage you to reach out, These fundamental questions can help you feel a sense of progression. The journey to precious metals is an easy one. There is just some refinement for each individual investor.
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