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Gold Investment – a Powerful Diversification Method

A diverse selection of investments is essential if you want to create a well-balanced portfolio. Most financial advisers recommend that you allow for a small percentage of alternative investments which include hard assets such as precious metals and collectables.

Gold is considered an ideal method of diversification by some investors, as it often climbs in value during times of economic crisis and its performance has very little statistical correlation to the stock market. In other words, this means that in the event of a market crash, gold is unlikely to be affected in the same way that traditional stocks and shares would.

Gold also has a long and proven market history, with people turning to the precious metal as a store of wealth for centuries. The estimated annual returns for holding gold bullion over the last 15 years is a little over 12 percent.

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Reasons to invest in gold

Gold is a tangible asset that offers real value and reduces risk. Unlike stocks and shares,

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gold is something physical that you can hold in the palm of your hand. It also offers a great alternative to fiat currency which has no real material value and is not backed by any physical commodity.

Here’s the deal…

Gold offers a material value based on the weight of its gold content whereas the value of fiat money is based heavily on supply and demand. It is also only valuable as long as people trust the central government and bank that issues the notes, whereas gold prices aren’t quite as reliant on these factors. Here are several other key reasons why gold is an investment worth considering:

High liquidity

Gold is considered a liquid asset which means that it is relatively easy to sell or convert into cash. There are thousands of sellers and dealers both online and off and physical bullion is one of the most widely traded commodities all over the world.

Production is declining

Gold is a finite resource which means we could eventually run out of it one day. Gold production has already started declining in some countries, in particular, South Africa, which used to be the biggest producer of gold in the world. As resources become scarcer and the cost of mining them increases, gold mining companies will be forced to increase their costs which could mean that gold prices rise as a result. It can take from five to 10 years to bring a new mine into production so should global demand for gold continue to rise then mining companies may struggle to meet it.

Gold Investment
Abandoned Gold Mine

Global demand

New uses for gold are being discovered all the time. Advances in technology have led to a great deal of gold being used in computer chips and electronic devices, for example. This is because although gold is more expensive than other more conductive materials such as silver and copper, it doesn’t oxidise in the same way that other metals would.

That’s not all…

There is also currently no real substitute for gold. The fact that it does not tarnish and is an excellent conductor of heat, light and electricity makes gold the ideal material for a wide range of industrial uses.

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Gold as a hedge against inflation

Gold is often purchased as a hedge against inflation. This is because traditionally gold prices have always been shown to hold their value over long periods of time, thus offering valuable protection against a potential dip in currency. Statistics have also shown that during periods of high rates of inflation, gold prices have risen significantly, making it an attractive prospect for investors.

Something to pass on to family and loved ones

Gold is often left to people as an inheritance due to the fact it is an excellent store of wealth. Gold has been proven to hold its value over a long period of time which means people trust it to continue to do so in the future. It is also incredibly durable and the fact that it doesn’t tarnish means it can be passed on to future generations as a family heirloom.

Diversify your portfolio with Physical Gold

Physical Gold offers a wide range of gold products ideal for diversifying your investment portfolio. These include a huge range of gold bullion coins such as Krugerrands, Britannia’s and Sovereigns as well as VAT free gold bars. To speak to one of our experienced advisors, please give us a call on 020 7060 9992.

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Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.

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