‏Advantages and the Best Way to Invest in Gold Market

There are advantages of investing in gold, especially when periods of crisis push investor sentiment to the extremes of risk aversion, making safe-haven assets the focus. Gold is an excellent asset with a value that is better than the dollar as a reserve currency.

The year 2019 saw golds rise as the trade war between the United States and China weakened the global economy. This forced central banks to improve liquidity, which was a major support of gold prices.

Take India for example, it has also been experiencing an economic slowdown, and gold outperformed the risky asset class for stocks in 2019. 2020 started on a much weaker basis as the COVID-19 pandemic resulted in recession risks equal to or even greater than the Great Depression. This has increased the attractiveness of gold as many investors now consider it the “currency of last resort”.

Advantages of investing in gold:

* Gold is an investment asset and a reserve asset.

* The largest precious metal used in decorations.

* Gold is used as a technological element.

* Possession of gold does not carry any credit risk to anyone.

* Being distinguished by rarity, it maintains its value over time.

Quantitative stimulus concerns

The promise of endless quantitative easing from the US Federal Reserve and other global central banks will ensure the flow of soft (money) liquidity continues until the economy regains its strong footing.

* The decline in the dollar index.

* Very low interest rates.

* Huge fiscal stimulus from governments could lead to inflation.

These unique characteristics make it a real candidate for increased long-term diversification in investment portfolios. It is what makes gold more attractive because the opportunity cost of holding gold is negligible. Holding gold is the best way to hedge against inflation, and the demand for gold may continue for that long period.

The separation of gold prices from oil

This was observed during the global financial crisis of 2009 when gold was in demand and prices were rising until 2013-2014. Prices for crude oil and gold tend to move in tandem. But even with the recent decline in crude oil prices caused by the oil price war and the COVID-19 pandemic, gold prices recorded new highs, and there was some disconnections between yellow and black gold prices mainly because of the increased demand for yellow gold.

The most prominent motives to invest in gold

Although gold retreated slightly from its highs recently, with risk sentiment increasing, now it faces temporary setbacks for a number of factors:

* Flexible central bank policies.

* Demand to hedge against volatility.

* Inflation concerns stemming from a possible second wave of COVID-19.

* The influence of the American elections.

* India-China clash.

And other geopolitical turmoil that looks like it will last for a long time. Make this a good time to tactically increase the allocation towards gold in a staggered manner and at dips.

How to invest in gold

Perceptions of gold as an investment asset class have changed dramatically over the past two decades, therefore Investors can choose from a variety of gold investment products including:

* Possession of physical gold.

* Investing digital gold.

* Dealing with gold ETFs.

Gold ETFs

Gold ETFs are the ideal investment vehicle driven by high liquidity, and they are readily available, exchange-traded and have no exit loads (unlike some gold funds). They are publicly traded on exchanges, completely transparent in their holdings, combining the flexibility of stock investments and the simplicity of gold investments in one product.

With the unique structure and creation mechanism, ETFs have significantly lower expenses (0.5-1% p.a. management fee with secondary brokerage) compared to physical gold investments because of a lack of manufacture, waste and logistics/storage fees.

(Source: www.borsaforex.com/Advantagesof-investment-in-gold)