The economic problems that have affected much of the world over the last few years have left many people wondering where to invest their surplus cash. Whilst property investment had been the most popular option for a few decades, the market suffered quite dramatically when the financial crisis hit back in 2007. One investment option that has remained strong during these turbulent times is gold. So what is it that makes gold such a robust investment choice and what benefits does it provide?
Diversification
Many experienced investors will ensure that they have at least some gold shares in their portfolio to add diversification. This is because, unlike other stocks, gold is not tied to any other economy. If you have shares in oil for example, the price could be affected by sale price, disharmony in the producing country or even trade problems between governments. In short, there are many factors that could impact on the price of yours shares.
Stability in uncertain times
With gold, the only factor you have to worry about is its value on the market. Although gold bullion can experience short-term drops in price, over a longer period it has continued to increase in value. The reason that gold is not subject to sudden or extreme fluctuations in price is due to the fact it is produced and mined at very low levels and is a finite resource. In fact, it is estimated that if you gathered all the gold that has so far been mined in the world, it would form a cube with sides that measure 25 metres. The stability that gold offers means that investors can be sure that it won’t be unduly affected by external influences as other shares can be – the financial crisis being the most prominent example of such an event. At times of uncertainty, when share prices in other areas become unstable, gold suddenly becomes a much sought after investment choice.
Freedom to manoeuvre
The final benefit that makes gold such an attractive option to many investors is that it has good liquidity. In other words, you can quickly turn it into cash if you want to. This is due to the fact that gold is always being bought and sold. As a result, investors are happy to have some gold in their portfolio as it allows them to quickly react to market trends. So if they spot an investment opportunity in another sector that they believe will yield better returns, then can free up some cash by quickly selling some gold.
