Gold has very unique characteristics as an asset and it is likely that you have heard the saying that “gold is a safe haven asset” and “gold acts as a hedge against inflation”. This has always been an important reason it’s a good idea for everyone to hold some gold, but with most major developed countries inflation rates set to rise as a result of the past few years looser monetary policies designed to provide a stimulus to various flailing economies.
Why invest in gold?
Historical data has always shown gold retaining its value through time of hyper inflation and also deflation, when times are uncertain perhaps due market turbulence or geopolitical instability.
Most investors choose to allocate between and 2 – 10% of their investment portfolio to gold, this allocation balances out the portfolio and acts as an insurance for your asset as gold moves independently of for example bonds and stocks and any other adverse side effect of inflation.
By reducing your portfolio volatility you are effectively enhancing the performance of your overall asset count. For example, during times of economic crisis stocks may fail but gold has historically risen in value therefore serving as a high quality liquid asset.