8 Reasons to think about Gold
- Alexander Philipp
- Jan 23
- 3 min read
Why the human fascination with gold?
There are many ways to access gold. Physical purchases, investments in gold mining companies, heck you can pan for gold if you so choose. Today I want to outline a few factors regarding gold. The following should serve in so far as reasons to be aware of gold’s impact on financial planning. Without delving into the history of the gold standard, here are 8 reasons Canadian investors should be aware of gold. Gold is significant for retail investors for several reasons:
Inflation Hedge: Gold is traditionally viewed as a hedge against inflation. When the value of currency decreases due to inflation, gold often retains or even increases in value, preserving purchasing power. This aspect can be particularly appealing in times of economic uncertainty or when inflation rates are high.
Diversification: Including gold in an investment portfolio can help diversify risk. Gold often moves inversely to stock markets, providing a counterbalance when other investments like stocks or bonds are declining. This can reduce overall portfolio volatility. Individual goals and concerns should be considered.
Safe-Haven Asset: During times of geopolitical instability, financial crises, or market turmoil, investors often turn to gold due to its reputation as a safe-haven asset. It's seen as a stable investment that can protect wealth when other markets are fluctuating wildly.
Liquidity: Gold is highly liquid compared to many other alternative investments. It can be easily bought or sold in various forms (coins, bars, ETFs, etc.), making it accessible for retail investors who might need quick access to cash.
Long-term Value Preservation: Historically, gold has maintained its value over the long term, which is why many investors include it for wealth preservation over generations. Unlike paper money, which can lose value through inflation or hyperinflation, gold has intrinsic value.
Supply and Demand Dynamics: Gold's price is also influenced by supply constraints (since it's a finite resource) and demand from both investment vehicles and industrial uses (like electronics and jewelry). Understanding these dynamics can help investors understand the price of gold.
Interest Rates: Gold and interest rates typically have an inverse relationship. When interest rates are low, the opportunity cost of holding non-yielding assets like gold decreases, which can push its price up. Conversely, high interest rates can make gold less attractive.
Economic Indicators: Investors often watch economic indicators like GDP growth, unemployment rates, and monetary policy as these can signal when to buy or sell gold. For instance, aggressive monetary easing by central banks can lead to higher gold prices. The purchasing of gold by central banks is publicly available.
For retail investors in Canada, it's also worth considering how the Canadian dollar's value against the US dollar (where gold is typically priced in financial markets) can impact investment decisions in gold.
When considering gold as part of your investment strategy, it's crucial to balance it with your overall investment goals, risk tolerance, and the economic environment. Gold might not yield dividends or interest, but its potential for capital preservation and appreciation during certain market conditions makes it a noteworthy asset for many retail investors. There is a much longer history of gold for trade than what is mentioned here. This above serves for informational purposes only.
The information contained in this document has been prepared by Alexander Philipp a registered investment advisor attached to PEAK Securities Inc. The information has been obtained from sources considered reliable and relevant. The information in this document is general in nature and may not be complete in regards to your personal situation. This document does not constitute investment advice. The opinions expressed above do not necessarily reflect those of PEAK Securities Inc. Peak Securities is not liable for the content of this document.
