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18 Feb 2021
5 min read

Going for Gold: Why Now is a Good Time to Invest in the Precious Metal

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Written by OspreyFX News Team

Going for Gold: Why Now is a Good Time to Invest in the Precious Metal

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Key Takeaways

  • History of Gold Investment
  • 5 Reasons to have Gold in your Portfolio
  • Why Gold is a good investment in 2021
  • Gold Outlook in a Global Pandemic

Gold is a well-respected asset worldwide. One of the most popular of the precious metals group that has been interwoven into cultures dating back to ancient times. Gold is one of the earliest traded assets and still provides plenty of opportunities for investors and traders today.

If you’re thinking about “going for gold” read on for a deeper understanding of why people invest in gold and why 2021 could be the right year to do so.

The Gold Throwback

Throughout history, gold has been considered a trusted and valuable commodity. Despite the real value of the precious metal presenting itself in its negative correlation with the stock market and the positive correlation with inflation its store of value dates back way before the rise of the stock markets.

The precious metal’s power and wealth can be traced back as far as 4000BC. Gold’s rise to finance fame didn’t come until the late 1800s. It was then that the Gold Standard took the limelight meaning societies valued their currency to the price of gold. However, in the 1970s we witnessed the collapse of the Gold Standard, and in its place came fiat currency. For years Gold price remained stagnant but during the 2008 financial crisis Gold price almost doubled. Since then the asset has proved its strength as a hedge and here we bring you 5 reasons why having Gold in your portfolio is a good investment.

 

5 Reasons You Can Strike Success with Gold

Liquidity

Gold is typically considered to be a highly liquid instrument, allowing traders and investors to buy and sell Gold hassle-free.

Diversification

We have all heard the phrase, don’t place all your eggs in one basket. This infamous catchphrase is very true in the financial markets. A balanced portfolio containing a mix of asset types helps traders to spread risk and reduce volatility. Spreading your horizons will often include diversification assets that are not closely correlated. Historically, Gold has been known to have a negative correlation with stocks and other financial instruments. One clear example of this is 2008 when stocks plummeted, and we have seen investors flock to Gold.

Safe Haven

Unlike other assets like traditional currencies Gold is not directly impacted by interest rate decisions and it cannot be printed to control supply and demand. Gold is considered a safe haven asset because of its scarcity and the fact it has held its value over time. Not only that but the precious metal has proven its worth in the face of adverse economic uncertainty.

Inflation Hedge

Gold prices in the past have appreciated alongside a depreciating dollar, rising inflation, and when the cost of living increases. Over the years Gold prices have climbed and stock markets declined in times of high inflation. So, investors may look to gold as a hedge asset when they believe that their local currency or other investments are losing value.

Wealth Safeguarding

Throughout the ages, Gold has a history of holding its value and has been trusted by many for its wealth preservation attributes. Take for example owning $50 worth of gold 50 years ago and owning a $50 note. Gold has since increased its value and thus far proceeds your initial $50 investment. However, due to inflation the $50 has not grown in value and will not buy you as much as it would have in the 70s. Furthermore, over the last 30 years, Gold has increased by over 500%, so if you invested £2,000 in the metal then your investment could be worth over $10,000.

Is Gold A Good Investment in 2021?

Gold boasts some of the highest liquidity in the commodity market and more times than not has increased in value over time. So, yes, it is a good investment asset to have as part of your trading portfolio.

At the time of writing, the precious metal has reached a support level of $1765 which analysts believe will be a launching pad for a potentially big upside price trend. Nevertheless, it is important to note that Gold price can be volatile in the short term and 2021 is yet to go back to any sense of normality in the battle against the pandemic. With the vaccine plan underway, depending on efforts and how quickly economies recover could have an impact on Gold prices. But, drivers in Gold’s favor will be the weaker US Dollar and low-interest rates.

 

Final Thoughts

Gold provides traders with a lot of opportunities, with OspreyFX there are several ways that you can invest in Gold. What better way to feel the GOLD rush and strike your fortune in our latest blockbuster trading competition? Simply opt-in and trade your way to winning the much sought-after PlayStation 5.

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