There are a number of reasons why people are investing in gold.
One of the most common reasons is that it holds its value in times of economic uncertainty. Another reason why more people are investing in gold is that central banks are less and less willing to sell their gold bullion. A third major reason why gold is increasingly popular on the market is that emerging economies are showing a huge interest in the ownership and investment in gold.
Let’s break down each of these reasons for why so many people are investing in Gold:
So many people are investing in gold because it is the most reliable entity to invest in, especially in an uncertain economic climate. A cursory glance over the global socio-economic condition will yield countless examples of economic instability. The American economy has been experiencing 1% growth for the past two quarters; the Eurozone is in dire straits and reporting growth below 1%; Japan is close to a recession because their free-market tactics have stalled; and in England, the realities of Brexit have initiated a spending freeze for a lot of domestic companies. This is not even to mention the crisis in Venezuela, a country that used to boast a vibrant economy but is not unable to get food on the shelves to feed their own people.
Gold is an important investment in volatile times because it reacts in opposition to currencies based on paper investments. All the issues mentioned above cause consumer habits and business relationships to become more conservative. This lack of spending pushes the market into inflation mode, when the cost of living becomes more expensive and people fall into cycles of debt. While the stock market crashes in these times, gold always rises.
Less Supply Until More Mines Are Built
The majority of gold bullion on the stock market has come from the vaults of central banks. In recent years, central banks have been less willing to sell their bullion into the market. In fact, the shift has been almost 180 degrees, as many central banks are buying bullion back from the market. This was the trend from 1870 until 1970, at which point an attempt was made to demonetize gold and let paper currency do the work. The Official Monetary and Financial Institutes and Forum has published research showing that central banks have bought 350 tonnes of bullion a year over eight years. This is the same average that was met in 1970. This reflects a renewed interest in putting gold at the centre of the global economy. For investors this means there is less supply – at least until more gold mines are built in Canada, Brazil, and across Africa.
More Demand in Emerging Economies
A lot of emerging economies value gold as an item of jewelry more than Western cultures. The best example is India, an economy that projects to have far greater weight in the global economy by 2030. The Chinese are also buying gold bullion in huge amounts because it represents the most reliable investment in a shaky global economy.
These are only three of a multitude of reasons why people are investing in gold today. Check out a great list of other reasons to buy gold on Guildhallwealth.com, a wealth management company that specializes in ensuring long term prosperity. It appears as though gold will only take a more important place in the world economy as central bank’s plan a shift away from paper currency and potentially back to the gold standard.