Gold entered a bull market, climbing from just over £36 per gram to over £45 last year as a result of low interest rates and mounting financial anxiety following the Covid-19 market crisis. Gold might reach new highs in 2022 if financial instability persists, which is likely to be fueled by the slowing of economic growth after the pandemic.
Is gold still a wise investment?
A balanced portfolio may benefit from having gold as an investment asset. In the commodities markets, gold has some of the highest levels of liquidity, and its value has typically risen over time.
If you had invested £1,000 in gold 30 years ago, it would now be worth almost $500,000. indicating that the value of your initial investment could have exceeded $5,000. Even yet, an asset that has performed well over a long period of time can be preferable to one that hasn’t. If we know anything about financial markets, it’s that previous success is not a predictor of future performance.
Price of gold under the coronavirus
Gold’s value as a hedge for the S&P 500 has been further underlined by its price after the coronavirus outbreak. Gold reached new highs after the stock market fall that hadn’t been seen since 2012, and many analysts continue to forecast more rises. Given that gold is regarded as a “safe haven” and a hedge against volatile stock markets and financial instability, this is most likely the outcome of investors reallocating their capital towards it.
Please be aware that past performance does not guarantee future success.
Key conclusions
- There are several reasons why investors become exposed to gold. But there are several reasons why investors pick gold: as a refuge asset, a hedge against risk, or to diversify their holdings. Gold can be used as an investment asset for a number of reasons, and is frequently chosen for a combination of these.
- You can invest in gold in a variety of ways. There is no “optimal” way, though, because the instrument you should choose depends on your unique situation and financial goals.
- When the conditions are correct, gold makes a good investment. Understanding when to choose an asset is essential for successful investment. As a result, gold can be a wise investment, but much will depend on your unique situation and how well the asset fits into your portfolio.
- There are risks associated with gold. Like all financial assets, trading and investing in gold has the risk of financial loss. If you are aware of the hazards involved, you should only invest in or trade gold. To see how the price of gold has evolved over time and how gold traders use it to adjust their holdings when the ratio swings, read our article on the gold/silver ratio.
