Remember, There Are Many Reasons To Own Gold

22-May (KitcoNews) — While the gold market languishes quietly around the $1,200 per ounce level, the chart pattern has improved in recent weeks. Higher daily highs are seen on the chart as Asian buying interest supports the yellow metal on price declines.

For western investors, however, it is useful to take a look at the many different factors that can support the gold market. Traditionally, of course, gold is a safe-haven investment and a vehicle to preserve wealth and retain purchasing power. It is an inflation hedge, an insurance play against geopolitical risks, including severe economic dislocations or even war. It is a quasi-currency and is used to hedge against declines in the value of paper currencies.

…”Physical gold provides important non-correlated diversification within a well balanced portfolio. In fact, gold is unique in that it is the only primary asset that is not simultaneously someone else’s liability. An allocation to gold has been shown to protect and enhance returns, while reducing volatility,” added Peter A. Grant, chief market analyst at USAGOLD.

Gold has also performed well across differing macroeconomic environments. “Gold is indeed the classic inflation hedge, but it has performed well in periods of deflation —1930s, disinflation —2000s, and stagflation—1970s as well,” said Grant.

Gold also has properties to retain purchasing power, especially during times of rising inflation. Gold tends to rise as consumer prices increase, which means as cost of living jumps so does the value of one’s gold holdings. “Inflation is often the result of currency debasement, and gold generally maintains an inverse correlated to the dollar. As the greenback devalues, the dollar price of gold rises,” Grant noted.

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