Investing in Gold: 5+ Reasons Traders Do It

August 17, 2020
What’s so special about trading gold? Why investing in gold? Is it a good investment? Read this article.
Investing in Gold: 5+ Reasons Traders Do It

When you hear the word “gold,” the majority of you will link it with luxury, wealth, class, coins, or jewelry, right? We even use it to express someone’s importance as a person, with the well-known phrase “They have a heart of gold.” But what’s so special about this metal? Why investing in gold? Is it a good investment?

Well, for literally centuries, gold has been well-established in all corners of the world. Due to its high rate and rich history, it became a special and respected commodity over time.

Here’s Why Traders Are Investing in Gold.

  1. Historic Value

To begin with, we need to understand what exactly makes this metal special.

Well, it’s been around since 2000BC (that’s a long time!) when Egyptians started making jewelry. It wasn’t until 560BC that it was used as a form of currency.

At the time, people were looking for an easily transferable form of money that would make investing in gold more convenient and simple.

That’s when the creation of coins came into the picture since jewelry was already widely accepted and recognized worldwide.

Gold symbolized wealth throughout Europe, Asia, Africa, and the Americas.

Ever heard a family member say, “It has been in our family for years” while showing you an old, fancy object made of gold? This is because it has historical value!

The special metal managed to keep its rate throughout the years, passing on from one generation to the next. As the years went by, people started seeing it to pass on and protect their wealth.

Since forever, people have valued its uniqueness, and, let’s face it, it has a beautiful shiny color too!

Historic value of gold is one of the many reasons investors love trading it!

  1. Investing in Gold Vs. U.S. Dollar

The US dollar is the world’s reserve currency. However, if the dollar’s price falls against other currencies, it sometimes prompts to invest in gold for security.

Gold is usually seen as a “haven” asset during uncertain, challenging times because it is usually less volatile than other investments, like stocks.

A good example of this is the case of 1998-2008, when the price of gold almost tripled, source GoldPrice.org. Hitting the $1,000-an-ounce milestone. Then in 2012, its price hit around the $1800-$1900 mark.

So, when the fancy metal moves inversely to the U.S. dollar, meaning that the dollar moves lower, gold usually moves higher.

  1. When You Are Investing in Gold, You Are Protected From Deflation

Deflation is when prices decrease, businesses slow down, and the economy is buried under a lot of debt.

An example of this was witnessed in the 1930s when the Great Depression occurred, and in 2008, when the financial crisis hit different parts of the world.

During the Great Depression, there was a huge purchasing power over gold, while prices dropped sharply. This is because people chose to collect cash, and the safest place to hold the cash was in gold (or gold bars even).

In simple words, traders are investing in it both for hedging inflation and being protected by deflation.

  1. Creating a Diverse Portfolio

When people have investments that are not related to each other, they create a portfolio that reduces the overall volatility and risk.

Many traders investing in gold combine it with stocks and bonds. If some is doing terribly at some point, chances are, the other one is doing better.

In the 1970s, gold was thriving, but stocks were plummeting, and in the 1980s-1990s, the opposite happened. Stocks were doing awesomely well, but the pretty metal was suffering. Traders try to “play it safe” by creating a diverse portfolio for such challenging times.

  1. Why Traders Love Investing in Gold?

Let’s be honest. If not all of us, most of us have a little leprechaun living inside our soul. You know, that little Irish man in a green suit that loves his pot of gold?

In reality, there has been a huge demand for gold, especially in countries like India.

India is one of the largest gold-consuming nations in the world, especially when it comes to jewelry. Every year in October, India sees its highest global demand as they enter the Indian wedding season.

In China, for instance, gold bars are a traditional form of saving, and the demand has been steadfast.

SPDR Gold Trust became one of the largest ETFs in the U.S., as well as a single of the world’s largest holders of gold bullion in 2008, only four years after its inception.

investing-in-gold-like-a-professionalThe Investing in Gold “Golden” Conclusion

Through trading, yes, you can make money. You can, however, also lose money.

So, it all comes down to dedication, knowledge, strategy, and of course, a trustworthy broker.

Each trader shall be responsible for their own choices, always having in mind the risk of loss.

If you decide to trade gold, though, or you’re thinking about it, feel free to check out our website for more information on how to trade it!

At EverFX, our team is available to assist you in the best way possible.

EverFX, for every trade!

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

Categories: Trading

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