3 Benefits Of Buying Physical Gold When Trading Commodities

In these times of economic uncertainty, people are looking for different ways to diversify their investment portfolios. There are so many new trends from cryptocurrency to so-called “meme stocks”, at times, knowing where to turn can feel a little overwhelming.

Are you someone trying to navigate the complex world of modern investing? Well, you’ve likely come across the resurgence of buying physical gold and precious metals.

You may be asking yourself, “Does it still make sense to invest in gold, nowadays?” For anyone who has doubts, we’ve provided 3 incomparable benefits of gold as an investment option. Keep reading to find out what they are.

1. A Good Hedge against Inflation

Gold has long been viewed as a protection against inflation. Decisions that governments have made in the past have greatly influenced the value of their currency. Investors who chose to hold on to cash during crises have often suffered in moments of hyperinflation.

While the value of cash is usually controlled by the government and their decision, gold is not typically controlled by such forces. Since governments have abandoned the gold standard, they have been printing too much money. Professional economists know that this is an unsustainable operation and soon things will have to change. It may be better for you to have something other than cash when that time comes.

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This is what makes this precious metal so advantageous to investors. Many use it as an asset to diversify risk because it is good at maintaining its value over long periods of time. It tends to act independently of market volatility and is even known to behave inversely to fiat currency in times of crisis.

For instance, during the 2008 financial crisis, the value of gold increased from approximately $1,150 to $1,970 per ounce, adjusted for inflation. A similar thing happened during the first year of the pandemic.

Something to keep in mind is that investing in gold is not about receiving high returns, it’s about diversifying risk in times of crisis. Gold tends to be ineffective as a short-term hedge. That being said, when thinking long-term within a diverse portfolio, trading gold can certainly prove to be a strategic investment. This brings us nicely to our next benefit…

2. One of the Safest Investments

Like all investments, gold has had its dips in history, but overall, it has proven to rebound and increase in worth. This is of great benefit because the increase in the stock market is highly dependant on the performance of companies. This is not the case with gold.

In history, many companies have failed to keep promises or have been affected by forces beyond their control. As we previously mentioned, gold often tends to do the opposite to the economy in times of uncertainty. This is usually because people invest in it more in times of instability. As the availability of gold doesn’t change, the price goes up as a consequence.

Again, using the 2008 financial crisis as an example, had an investor’s portfolio consisted of only stock, bonds, and mutual funds, there would have been nothing left of their investments. Gold, however, would have retained its value, thus ensuring some protection to their assets in times of crisis.

3. Buying Physical Gold May Not Be What You Think.

When most people think of investing in gold, they usually imagine gold coins or bullion in their homes locked away in a safe to keep thieves out. This might make many feel reluctant in turning to gold as a safe investment because they don’t like the idea of having such a tangible asset in their homes. This is why it’s important to understand the options within gold investing.

There are a variety of options for owning gold without having it in your home. For example, digital gold (DGC) is a digital currency backed by gold. There are also gold ETFs which are trust funds that allow you, again, to own gold without having the responsibility of storing it yourself. Companies like ByteFederal can even allow you to convert cryptocurrency from an ATM. Nowadays, the choices are endless!

There are many benefits to these kinds of investment options as opposed to holding your own gold. For example, buying and selling are easier, there are fewer premiums on the spot price, and you can ensure professionals are checking the quality and safety of your gold at all times. But it’s also worth thinking about the risk of each option. Leaving your gold in a trust or with a company does leave you open to third-party risk. While they may be considered altogether credible, there is no guarantee of what the future holds.

So, think it through well. Make sure that the company you go for is trustworthy. Take your time to look up reviews from different sources before deciding to go with a service that stores your gold for you.

The Bigger Picture

Buying physical gold, like all investments, is not a guaranteed move, but it does have many undeniable benefits. In a time when the economy is facing unprecedented changes, many investors seek innovative options as well as tried and true formats like precious metals.

So, while it wouldn’t be wise to put all your eggs in one basket when it comes to gold, why not add a little color to your portfolio with the metal that has stood the test of time?

They say something worth more than gold is knowledge. So stay invested by continuing to browse our site for more insightful articles like this one.

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