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Gold maintains its purchasing power with unusual consistency compared to other assets.
Even during precarious economic times, like the 2008 market crash and the early days of the COVID-19 pandemic, gold holds value. Sometimes during such times, gold even increases in value. That’s why gold is a safe haven asset.
Gold is also considered a strategic asset and an inflation hedge.
There are different ways to invest in gold. For instance, investors can purchase gold as exchange-traded funds (ETFs). For beginning investors, however, the best way to invest in gold might be to purchase gold bullion: gold that central banks and governments keep as a reserve asset and which are at least 99.5% pure.
Here’s a look at how gold functions as:
- a safe haven asset
- a strategic asset
- a hedge against the dollar
Gold as a Safe Haven Asset
During times of economic instability, gold tends to maintain its purchasing power. Investors can often protect their wealth while the economy dips or currencies collapse by investing in gold.
In other words, gold acts as a safe haven during tumultuous economic times and political unrest.
When currencies decrease in value due to inflation, gold tends to maintain its value.
That doesn’t mean that the value of gold never dips. It does, like any other asset. But the value of gold, unlike the value of many other assets, tends to remain consistent. Often, therefore, when it looks as though the economy will become unstable, investors will choose to invest in gold.
If you’re a beginning investor in Canada, investing in gold bullion through Canadian bullion dealers is seriously worth considering.
Gold as a Strategic Asset
Strategic assets create recurring benefits, are unique, difficult to imitate and trade, and give investors competitive advantages.
Investors consider gold a strategic asset because the near and distant past has proven that gold can be a useful asset for hedging risks during times of monetary or fiscal mismanagement.
During periods of inflation, gold tends to appreciate more often than not.
Not only that, but gold can boost and diversify your portfolio and protect it against the rise and falls of markets. Gold has a better portfolio weight than many other asset classes. It’s also a finite resource with tons of industrial use, giving it even more value over the long term.
Gold as an Inflation Hedge
In the United States, gold has proven to function as a hedge against rising inflation and a declining dollar. Investors choose to invest in gold when their money starts to lose value or might lose value soon.
Investing in Gold Bullion
If you’re a beginning investor, investing in gold bullion is seriously worth considering. Gold bullion is relatively affordable and exempt from sales tax.
Where to Buy Gold Bullion
Gold bullion is sold by gold dealers and reserved at central banks and institutional investors.
So, if you want to invest in gold, head over to your local bullion dealer. Doing so could potentially pay off—big time.