It has long been an investor’s debate on gold over paper investments such as stocks, currencies, bonds, or money market funds.
For centuries, gold has been a valuable commodity. It is used as a currency, and is a symbol of wealth and power.
This long-standing history demonstrates the stability of gold and its attractiveness over time.
Gold is considered by investors as one of the safest investments out there as the price of gold often moves in the opposite direction of the stock market or economic downturns.
Here’s why it is more lucrative to put your money in the precious metal than stocks.
Gold’s Value Increases In The Face Of A Pandemic
Gold’s price increases in response to events that cause the value of paper investments to decline.
As the economy takes a dive, stocks plunge as well. For example, when Covid-19 hit the world this year, stocks plummeted drastically as traders panic-sold out of fear.
In a UBS survey of 3,750 investors worldwide, seven in 10 investors said they were financially impacted by the pandemic, with 25 per cent deeming the impact “significant.”
On the other hand, people flocked to gold shops to sell their gold as the price of the precious metal spikes and the economy tanked due to the pandemic.
Gold surged to a seven-year high on April 14 to US$1,731.25 an ounce following global moves led by the United States to reinflate economies with trillions of dollars of stimulus measures.
This boosted the price of gold across the world, tempting many to sell their gold jewellery and gold bars.
It also proves that gold should be an important part of a diversified investment portfolio to balance out the risks.
Diversifying Your Portfolio With Gold
Gold is typically seen as a “safe haven” asset in times of uncertainty because it is less volatile than other investments like stocks.
Gold is a good-to-have for diversifying portfolios because it is not positively correlated with other assets.
Thus, when the price of other assets decreases, gold prices may increase and this can maintain the portfolio’s value even in crisis times.
However, it is also worthy to take note that every investment comes with risks — gold is no exception.
You can expect the price of gold to rise when the economy flounders. Conversely, if business and trade expand rapidly, you can expect the value of gold to fall.
Gold prices and interest rates are also inversely related.
If interest rates are higher, investors would prefer to liquidate other assets and put their money into bonds. As funds move into fixed-income securities, prices of gold will tend to drop.
The reverse is also true. As interest rates fall, the value of gold will rise.
Is Now A Good Time To Buy Gold?
This raises the question: when is a good time to buy?
Albert Cheng, CEO of Singapore Bullion Market Association, said in a CNBC interview that there is “no good time to buy gold”, but asserted that “every investor should have some gold in their portfolio.”
He sees the asset hitting US$2,000 per ounce by the end of the year.
Typically, financial advisors recommend a gold allocation of one to five per cent of an individual’s overall portfolio.
Cheng said that could shift higher from five to 15 per cent.
Global economies are on the recovery and with the positive vaccine progress, the price of gold is starting to fall and this means that now could be a good time to buy gold.
If you are looking to diversify your portfolio and purchase gold, Singapore-based fintech company Everest Gold makes it very convenient for both amateur and seasoned investors alike with their digital gold trading platform.
The absence of gold trading facilities in Singapore prevents investors from leveraging on real-time gold prices. Security, storage and other inconveniences also deter new investors from entering the market.
To address these problems, Everest Gold launched their one-of-its-kind digital trading platform for gold earlier this year.
Through their app, you can buy, sell and profit instantaneously. Anyone interested in gold investing can start trading from as low as US$0.60.
In addition, the fintech firm takes care of security and storage for your gold assets. Everest Gold partners with international firms to audit, secure and provide custodial services for your gold bullion.
As a result, gold trading can be done on-the-go and anytime since all you really need is an internet connection and a smartphone.
The app displays real-time gold prices, so that you can make trading decisions based on accurate market data. Since you can access the app readily from your smartphone, you can react to market fluctuations instantly.
This article was written in collaboration with Everest Gold.
Featured Image Credit: Everest Gold / Shutterstock