The Variety of Factors Turning Gold Investments into Pure Gold
Gold has always been one of the smartest and most stable long term investments a person can make. But now, it’s poised to get a whole lot smarter. According to the World Gold Council, a variety of market factors are coming together to make gold investments practically a necessity for any current portfolio, to protect against other, less stable markets.
Weakening Bonds
Bonds have always been considered one of the more stable investments a person can make. The theory is that you buy bonds now, and after a certain period of time the bonds mature, yielding a larger sum of money than you put in.
However, demand for bonds has been steadily rising, and with it, prices. The higher the price of the bond, the lower the eventual yield. This is due in large part to quantitative easing, which has compromised the value of the bonds being sold.
Quantitative easing occurs when a central bank, like our Federal Reserve, buys government securities in order to decrease interest rates and increase the overall money supply. The result is that cash becomes devalued due to inflation, and the government securities being purchased—including bonds, as well as CDs, money markets, and other investments—become essentially valueless.
This devaluing of bonds is happening all over the world. The European Central Bank is buying up bonds, driving demand up and yields down. Meanwhile, the Bank of Japan is experiencing weaker bond demand after the Japanese government announced a stimulus package totaling 28 trillion yen (or around $275 billion). Though seemingly significant, the package was smaller than expected, and is leading to a loss of confidence in their monetary policies—again driving bond yields down.
Rising Gold
As previously mentioned, gold has also always been considered to be a stable long term investment. The difference is while bond values plummet, gold values are going up. Gold prices have risen 27% in 2016—more than most other commodities, as well as the S&P 500.
Cash and bonds may be losing their value, but gold is a physical commodity, making it more stable over time. Therefore the smartest way for an investor to preserve the buying power of their cash is to use it to invest in gold; not just gold futures or investments, but actual, physical gold. While other investments go down, gold values typically go up. Because of this, over the course of a couple of decades, a relatively small investment in gold can grow into a substantial sum.
This particularly makes gold a perfect investment for IRAs. The markets have already proven to be unstable, causing many investors to lose up to half of their accumulated nest egg with the market crash of 2008. Now bonds are proving unreliable as well. But gold can help retirees to preserve the buying power of their cash, providing a better, safer, and more valuable long term investment.
The world economy is becoming less and less stable all the time. Investments that were previously thought to be safe no longer provide the security that they used to. As this happens, it’s becoming increasingly difficult for the average worker to build up enough money to retire on. But while the markets flounder, currency is devalued, and bonds yield less and less profit, gold will always be there; a reliable investment to see the average investor through their retirement, safely and worry-free.