Stabilty of Gold
Gold has reigned supreme for thousands of years

Since the dawn of recorded history, man has prized gold for its beauty and enduring luster. And just as gold never loses its sheen, its appeal as an investment asset is also enduring.

Gold is known as the “asset of last resort”. And while that may seem overly dramatic, it is not an inapt description. Throughout history, fiat currencies (money that is only backed by its government of issuance) have come and gone; gold has remained remarkably stable.

Gold is not tied to any one government or financial market. As such, it is less susceptible to global unrest, political instability or economic slowdowns.

Over the last two hundred years, the value of gold has outpaced inflation. In other words, gold has maintained its purchasing power while other commodities have flopped. For example, one U.S. dollar today could only purchase a nickel’s worth of goods one hundred years ago.

As inflation woes worsen, the price of gold increases as investors rush to the value retention it offers. Investing in gold is one of the surest forms of insurance against the fluctuations of a volatile economy. Even countries rely on gold as a store of value- one quarter of the world’s gold supply is held in reserve by governments.

The price of gold is negatively correlated to the value of other assets like stocks. This means that as the value of different stocks decreases, gold’s price tends to increase. In the midst of our current global slowdown, the price of gold should only continue to rise as stock markets flounder and more investors pull their money out of government-backed currencies and investments.

For these reasons, gold is often purchased as a hedge against inflation and currency devaluation. Even when gold does suffer short-term devaluation, it always seems to recover its value. Because gold is scarce and cannot be manufactured, its value is ensured for perpetuity.

In addition to its appeal as a store of value, gold can improve the stability of your entire portfolio by increasing its diversity. The purpose of portfolio diversification is to protect your entire portfolio from the devaluation of one asset. Spreading your money around a variety of assets ensures that your entire nest egg will not be brought down by a single bad investment.