As an investor, you may have been feeling apprehensive about the economy due to the massive impact that the COVID-19 pandemic has caused. It’s normal to feel anxious about your finances, whether personal or for your business. Nonetheless, you should find solutions to mitigate this type of risk so that you can alleviate your worries even just a bit.
An excellent way to do this is to look for the right investment asset. Some people invest in gold since it has proven to withstand the test of time.
If you’re thinking about buying gold during this economic crisis, here are the benefits that you can enjoy:
1. Gold Is Very Liquid
While gold is no longer used explicitly as currency nowadays, the tangible asset can be sold as a commodity in exchange for money. This type of liquidity is valuable, especially during times of a global crisis because you can easily convert your investment into cash to buy necessities.
This aspect of gold is useful since you never know when you’ll need money for health emergencies. For instance, with the current coronavirus situation, you might be required to deposit a down payment to the hospital if you want to be admitted. Fortunately, you can easily find a buyer for your gold during these situations.
These are the types of gold investments that you can consider:
- Bullions and coins – Gold bars and coins are the most-known types of gold ownership. These assets are typically made of pure gold that are certified for their weight and purity. For security purposes, they usually come with serial numbers.
- Jewelry – You can also wear your wealth and invest in gold jewelry. A majority of gold production is directed at creating these valuable accessories. It enables you to enjoy your investments while allowing for a profit margin, albeit a little lesser than buying gold bullions and coins.
- ETFs and mutual funds – An alternative to purchasing gold directly is investing in gold-based exchange-traded and mutual funds. These operate similarly to stocks, so you don’t need to worry about where to store your physical gold. However, it might not be quite as liquid.
2. Demand Never Goes Away
Gold has always been an appealing investment because it remains to be a valuable commodity. Throughout the years, lots of people have bought and sold this asset. Plus, it’s highly likely that this trend will continue until future generations of investors due to the limited supply that’s been mined.
Currently, the price of gold has surged, and it’s believed that demand will struggle. Nonetheless, people will still be investing in this tangible asset even after this pandemic.
3. Inflation And Deflation Protection
Gold is considered a high-value commodity because it serves as an inflation hedge and protects against deflation as well. It provides investors with a long-term store of value, which means that it offers better benefits than currency.
This precious metal’s price typically rises when there’s an increase in the cost of living. Since gold can be deemed as a commodity and is priced using fiat money, its value increases when the price of other goods also surge. This phenomenon makes it a viable option against inflation.
On the other hand, the asset also protects against deflation. Historically, its purchasing power increases during financial crises due to the fact that people hold cash in these times through gold.
If you’re planning to build a retirement nest egg, you better start now. Moreover, avoid making the common mistake of not investing in viable assets, such as gold, since this strategy can help you live more comfortably in the future.
4. Zero Counterparty Risk
Because gold is tangible, you don’t really need a paper contract to certify that you have this particular asset. It’s the only investment that isn’t someone else’s liability, which means that it’s least likely for one party to default on their contractual obligations.
5. Portfolio Diversification
Diversifying your portfolio is a practical way to limit the risks involved in investing. For instance, the airline and hotel industries are taking a big hit with today’s coronavirus pandemic. This means that their stocks may have plummeted. If you invested all your money in them, it’s likely that you’re running on negative right now.
However, if you also invested in gold and other companies, like e-commerce businesses, you balance the adverse impact that the health crisis has on your other assets.
Conclusion
Investing in gold makes a lot of sense during economic crises because it’s an excellent long-term store of value. Plus, it protects against both inflation and deflation since its demand continues to rise. There’s also zero counterparty risk, plus it allows you to diversify your portfolio.
