A popular axiom in the investment market is that abrupt pitfalls always spike the prices of residual assets like gold and silver. This time it, however, turns out to be true. Economic tensions are at the top, with the latest market news signaling major forex downturns after tariff declarations from the white house.
Moreover, geopolitical complexities ride the tide, too. Trump declared the names of 55 countries that must bear the lion’s share of the tariff taxes. The list has China at the top!
Certainly, the inflation rate is 2.82%, with emergent signs of lowering. Last month it was 3.00%. However, the market is gripped with fear of another spike in inflation soon.
The inflation rate will be directly affected if trade turmoil gains momentum following Trump’s policy. But that’s not stopping gold prices from rising up and above.
Should You Invest in Gold Now?Â
Several investors assume that gold is no longer bound to the market axiom. So, what could be the underlying factors driving up gold prices?
Investors may ask- why should they be bothered? So long as it rises, the reason behind it doesn’t matter! Meanwhile, that might not be true. You should invest in gold while ensuring the asset value won’t drop frantically!
On that note, let’s scrape up the actual reasons behind the flattering gold price.
Firstly, the central bank is keen to diversify resources. Hence, many individual investors seek gold assets, considering it a haven! Secondly, the historical average return from gold is enormous. That’s the latest market news!
| Time Point | Price | Price CAGR | Time Point Price CAGR Overall Return Rate |
| Jan 2024 | $2,073 | 28.98% | |
| Jan 2020 | $1,243 18.69% | 29% | 136% |
| Jan 2000 | $270 | 18.69% | (84% |
| Jan 1971 | $44 | 10% | 6615.50% |
| Overall $2,929 | $2.939.30 | 8% |
Ardent Reasons to Seek Gold Investments
Due to the generous investment returns, gold might be a good asset for your portfolio.
Gold Provides a Hedge Against Economic Uncertainty
The pandemic, followed by geopolitical issues and financial concerns, can sometimes shake economic landscapes. But gold has always provided a hedge cushion, making it valuable during economic uncertainties.
The current gold price hike is noteworthy as it breaks the usual correlations. This time, it is breaking the usual correlations. Empirically, gold prices have fallen with the rise in real interest rates. But not this time.
When the federal interest rates started slumping and falling fast in 2024, gold also went down.
Rising against when the US dollar started regaining its strength.
Helping You Preserve Your Capital
The demand for gold has always risen whenever inflation seems to be peaking. Yellow metal has always acted as a valuable asset in diversifying and preserving your portfolio in times of crisis.
The inflation risk grows when the deferral institutions and banks implement new monetary policies. It also results in an implosive downfall of the purchasing power of all fiat currencies.
That’s where the role of gold becomes pivotal. Even if inflation doesn’t lead to gold gains, the asset can preserve your capital.
You can print the fiat currencies at will. However, gold supply increases by 1 or 2 points year-on-year.
Portfolio DiversificationÂ
People prefer gold assets when they want to diversify their asset portfolio. So, how do you seek to diversify your portfolio?
Firstly, assets that are not cross-dependent on each other should be sought. Meanwhile, gold always had a negative correlation with stocks or other traditional and alternative financial assets.
For example, the 1970s was a favorable time for gold, but stocks plummeted big time. Similarly, stocks went through a golden period in the 1980s, but gold remained astray.
It’s not only about these two occasions. Empirically, gold’s performance has always been like this! That’s another reason to confidently invest in gold!
Assets To Invest In
There are three popular gold assets that investors can bank on:
Gold ETFs
The popularity of ETFs has influenced how people invest in metals, including gold. Meanwhile, Gold ETFs offer some characteristic advantages that others don’t offer. For example, gold ETFs are easy to buy and sell. There are no storage needs or security risks in these ETFs.
Mining StocksÂ
Are you planning to invest in gold mining companies? These stocks can often offer exposure to gold prices and create avenues for additional returns as well.
The stocks are liquid and available on all important stock exchanges.
Meanwhile, the two essential benefits of gold mining stocks are:
In Bullish markets, the mining stocks can surpass the gold prices
You can get dividends against selective gold mining stocks
For example, Newmont Corporation (NEM) and Barrick Gold offer dividends.
Gold Futures and Miscellaneous OptionsÂ
Gold futures and other options offer multiple ways to gain exposure to gold prices. But what are gold futures?
These are contracts that trade through exchange pathways. The only difference with real-time gold purchases is that people buy a commodity against a preset price at a future date.
