Unlike fiat currency or other assets, gold has maintained its value for thousands of years. Gold has historically been an effective hedge against inflation due to its tendency to increase when living costs rise or when a political or economic crisis occurs. It is often referred to as a ‘safe-haven’ commodity during times of uncertainty.
Gold investors have benefited from gold’s negative association with the stock market and fiat money. This helps to reduce trading risks as a strategy through diversification. Furthermore, gold has been a significant factor in stabilizing the reserves of world central banks.
Globally, there has been a great interest in gold demand. In the second quarter of 2020, gold demand for investment was amounted to 556.3 metric tons, while in the third quarter of 2021, gold for jewelry purposes amounted to 442.6 metric tons.
Today, several factors have affected financial markets since the pandemic outbreak, including Brexit, and the current Ukrainian-Russian crisis, all of which have accelerated global inflation.
According to the Central Bank of England, the rate of inflation is expected to rise to over 7% in spring 2022. In addition to this, the price of essential commodities, such as gold, coffee, and rice has increased.
Increasingly, these factors have been compounded by a dramatic rise in energy prices due to low supply, due particularly to the last COVID-19 wave, and will possibly rise more in the current Ukrainian – Russian crisis.
It is during these types of crises that investors begin to seriously consider gold’s significance.
The advantages of investing in gold
Apart from financial insecurities, gold is also defined as an essential commodity, due to its ability to maintain, or even grow, in times of geopolitical uncertainty. As an example, the Ukrainian-Russian crisis caused the price of precious metals to rise to levels similar to those experienced during the Covid-19 crisis.
Investments in gold are particularly beneficial to investors in uncertain times, whether they are seeking short-term or long-term investments. Investing during volatile times, by buying or selling, has always appealed to many traders.
Moreover, gold is a key to protecting your portfolio at minimum risk in these times. It provides you with the ability to buy or sell other assets and to gain liquidity according to your investment strategy.
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The best way to invest in gold
There are certain ways you need to consider when investing, and these may depend on whether you are investing for the long or the short term. In addition, timing is crucial in the process of investing in precious metals:
Trading gold via contract for difference (CFD)
As one of the quickest and inexpensive ways to invest in gold overall markets is via CFD trading, which allows you to trade gold instruments, such as XAU/USD at the opening and closing of each session in real-time. This method also uses leverage to open large positions on the market without ownership. It can be traded 24 hours a day, five days a week, which can also be done online.
Investing in gold bars
Gold bars or coins are largely, or completely, pure gold and are documented according to their mass and purity. They are also identified by their serial numbers. Gold bars are usually costly and reserved at banks or gold providers for security reasons. However, they can be traded through operations of buying or selling when the owner decides to.
Investing in Gold ETFs
Most investors who wish to gain profits from gold without holding gold invest in exchange-traded funds (ETFs), which are flexible investment products available globally. Investing in these funds provides investors with direct exposure to the price of gold, without them owning it directly. This is one of the easiest methods but with long-term benefits.
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