Understand the Reasons for Investing In Gold

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According to most investors, they tend to purchase gold as a direct investment, as a haven or as a hedge. 

Of course, these reasons are the primary ones, and most researches state that the best way to protect you against a market crash is by owning physical commodities of this particular precious metal.

You should have in mind that you can find it in the form of coins, bars when it comes to physical commodity, or you can invest in virtual products based on ETFs that will help you along the way.

Therefore, before you make up your mind, you should research a few things such as how much you have to pay for 1 oz gold coins for sale as well as a historical perspective of its value so that you can determine whether it will be worthwhile or not.

We will help you understand these reasons by providing you thorough information on possibilities that you can make:

  1. Hedge Against Stock Market Crash

If you are new to the investment world, you should know that hedges are investments that will offset losses and provide you the ability to retain the value you gave at first. 

That is why most investors choose gold as the hedge against currency decline, usually the US dollar since it is a worldwide currency that we use for numerous things that surround us.

Since the currency tends to fluctuate based on numerous factors that create higher prices in general as well as higher inflation, that will lead to lowering the buying power of money that you have, which is why you should retain its value by purchasing gold instead.

For instance, the overall price of gold doubled in the period between 2002 and 2007, and it reached the amount of $835 per ounce. However, during that particular period, the value of the dollar fell against the euro for 40%, which was problematic for wealthy people.

During the financial crisis that happened in the world in 2009, investors wanted to find ways to protect themselves against dollar decline that was caused due to two crucial factors.

The first one was when the government launched a quantitative easing program in December 2008, in which they exchanged credit for the bank of Treasuries. 

They created this particular credit from thin air, and that caused concern that increased money supply will create inflation, which will deplete the value of the dollar and raise prices.

The second one was deficit spending that created a high debt-to-GDP ratio, and it reached the critical levels up to 77%, which was highly problematic. That also led to inflation because of the increase in the nation’s debt caused the dollar to decline. 

Fifteen days after the crash, gold prices started to increase, and that is when investors started panicking, they sold everything they had in stocks and bought gold as the best way to preserve wealth.

Even though gold prices lost value after that and rebounded the stock prices, investors moved their money into stocks and used lower prices as the way to gain profit. 

However, people who thought that gold was a sure thing, they have lost their money, since they did not reinvest back into stocks.

  1. Safe Haven

Creating a haven means that you will protect the investors against a potential catastrophe. That is the main reason why investors decided to buy it during the financial crisis. 

Have in mind that value rocketed after the eurozone crisis, and investors were also concerned when it comes to Dodd-Frank Wall Street Reform Act (check this link: https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act to learn more about it) and Obamacare. 

At the same time, some people thought that the USA economy would collapse, and as a result, the prices doubled again.

  1. Direct Investment

In case you wish to profit from increases that are happening due to numerous factors we’ve mentioned above, you can purchase gold as direct investment and take advantage of future increases that may occur.

Others tend to purchase it as a valuable substance that has exceptional durability, and numerous wealthy individuals hold it as a way of protection.

However, we recommend you to avoid buying gold alone as an investment since it can have low valleys and high peaks. Therefore, it is a highly risky chance for average investors, and in the long run, it will not beat inflation.

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