We always keep reading that gold is the best hedge against inflation. Gold prices have been going up for quite some time now. The way it is going up, it could be treated as an investment instead of treating it as a hedging tool. Many people have already started investing in gold, but then safety of storing gold is an issue.
A better way would be to purchase as a mutual fund unit in a gold exchange traded fund. That way, you would also have liquidity, since the price of the unit would rise as the price of gold prices and could be sold anytime through the stock exchange. But why should we treat it as an investment option?
Some of the reasons are the appreciation in the value of the US dollar and rise in the interest rates. The economy of most of the so called advanced economies is in a bad state and it does not look like there will be recovery soon. Most of the countries hold back their currency with gold reserves, so most of them would either increase their gold reserves.
Worldwide people have started investing in gold exchange traded funds. These funds back their units by buying gold. This has also increased the demand for gold. For the purpose of improving the economy most of the governments have increased their spending to increase the money supply in the economy.
More the money, more the chances of that money finding its way into gold and more the demand for gold, the prices will go up. Taking the past trend we might say that gold does not give good returns. But is that true? Have we not seen prices of gold just sky rocketing.
Gold prices go up, but they do not give returns as good as those of other investments. This is the reason it is a good investment option for those who do not like to take risks. With news that many countries on the verge of sovereign defaults and rising interest rates, there would be more demand for gold. So buy gold now.
1 comment:
This was really very useful for me, Thanks Anthony
Post a Comment