Gold is seemingly invincible even in crashing markets when all stocks and bonds are in freefall. When inflation is the key threat to your portfolio and once again, it is gold that meets and surpasses inflation. In the long term, gold provides a high return on investment that can be compared to the most lucrative asset classes, but without their risks and volatility.
Simply put, gold is the number one all-round asset that all investors need in their portfolios to mitigate risks and boost portfolio returns. You can expect it to provide reasonable returns when all other asset classes disappoint, falter or fail during tough financial times.
Gold has several qualities that enhance its prestige, making it the perfect asset class. While gold has always been a scarce commodity, it is thanks to this scarcity that gold will always remain valuable and its value will keep rising in the long term.
Scarcity and High Demand – the Perfect Combination for High Value
Besides scarce supply, the insatiable demand for gold is keeping the value of this luxury commodity sky high. Since 2001, the global demand for gold has grown at an astonishing rate of 14%. The end result? Gold prices skyrocketed almost six-fold during this period.
Everyone knows that high demand coupled with scarcity is the perfect combination for high value. However, the phenomenal rise in the value of gold seems to go way beyond this rudimentary economic principle. Consequently, gold has emerged as the premium diversification and risk management tool that can boost returns concurrently.
Another key factor that has driven the value of gold is the interest of central banks around the world in this prime commodity. Central banks need a commodity or asset class that can mitigate risks during these uncertain times, while providing excellent returns on investment. Gold is the perfect candidate for central banks, which has boosted investor confidence in it.
Excellent Returns Without the Risks
As an investment asset, gold provides an average return of about 10%, which is right up there with stocks that are known for their exceptionally high returns. However, stocks also carry great risks and are extremely susceptible to catastrophic economic crises and turmoil that transpire every decade or so.
But gold is different. The metal is seemingly invincible even in the face of economic cataclysms. It is a high-performance premium asset that can deliver results beyond expectations, even during stock market crashes and upheavals.
In addition to all of these advantages, gold is highly liquid since large volumes of gold are traded daily. It is even more liquid than key financial markets like the Dow Jones Industrial Average. The worldwide daily trade in gold amounted to $144 billion during 2019. For even greater liquidity, investors can resort to gold-backed ETFs.
With impressive returns on investment, near invincibility against economic turmoil and crashing markets and the priceless ability to surpass inflation, gold is an unmatched investment class that every investor should have in their portfolio.