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As glittering as it was way back in 800 B.C., gold has owned the throne for its value and rich history among cultures all throughout the world. It has maintained and even increased its value throughout the ages that people tend to pass it on from generation to generation in order to preserve their wealth. Can gold be then as precious as it seems to be a ‘safe haven’ when it comes to a volatile market?
Market volatility can come in different shapes and sized and is and will always be a part and parcel of investing. Traditionally speaking, gold has been a refuge for investors seeking shelter from a volatile stock market. Today, the push and pull between a strong market outlook and concerns that inflation could stage a comeback has made gold as a good hedge against inflation as the growing interest of investors and other people to gold continue to skyrocket.
When the market becomes volatile, owning precious metals can reduce the potential portfolio losses. Why? First, it is a strategic holding that diversifies your portfolio – your go-to safe-haven when geopolitical risk is blazing. Second, gold is negatively correlated with the rest of the market which means that even when the stock and bond prices fall off the edge, gold prices can be unchanged, or even go higher. Lastly, the purchasing power of gold is relatively stable because of its limited supply being circulated. Central banks can make more money and companies may issue new stock, but gold cannot be created in just a snap of a finger.
The fear that this year will mark the big top in equities has even more attracted investors to use gold as a defence against the threat of further losses. Market volatility is more likely to continue in the markets which gives way to the comeback of gold as a genuine insurance policy in a shaky market. The volatility is an indicator on how odd an asset gold is, with its numerous advantages – lightweight, ultra-portable, and it doesn’t spoil or tarnish.
Generally speaking, gold is not considered as an investment since it does not generate income but it is some kind of different entity that people run to when they are scared of other assets because its price tends to rise when the cost of living increases. Thus, gold can be deemed as the crisis commodity as it has retained its value not only in financial uncertainty but in political uncertainty as well.
The demand of gold, especially in investors keeps on increasing as many are beginning to see gold as an investment class in which funds should be allocated, although the price of gold can be volatile for a short term, but it has always maintained its value over a long term. Gold has served as a hedge against the volatile market, making gold worthy to be considered as an investment.
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