Is gold the safe investment commodity choice in 2021? : Now coming back to the point of financial investment, today, we will try and answer the question that is it wise to invest in gold in 2020 or you should look somewhere else. Also, if investing in gold is, in fact, a great way to go, then how should one invest in gold? There are a lot of further subdivided questions that arise when we head on the way to answer this question and we will try to cover them all. To keep the information simple and elaborate at the same time, we will start with the basic and general info and then will make our way into more specific and technical domain. One more thing, to make the discussion more informative we will take up the example of gold rate in Mumbai and will stick to this to explain the concepts whenever required. So, without any further ado, let’s jump right into the discussion for today.
Whether it is the tensions in the Middle East, Africa or elsewhere, it is becoming increasingly obvious that political and economic uncertainty is another reality of our modern economic environment. For this reason, investors typically look at gold as a safe haven during times of political and economic uncertainty. Why is this? Well, history is full of collapsing empires, political coups, and the collapse of currencies. During such times, investors who held gold were able to successfully protect their wealth and, in some cases, even use the commodity to escape from all of the turmoil. Consequently, whenever there are news events that hint at some type of global economic uncertainty, investors will often buy gold as a safe haven.
Harry Schultz’ International Harry Schultz Letter (a paid subscription investment service) has gold going up eventually to $6,000 saying “We (collectively) are poised at a heart-stopping moment in economic times. On the one extreme side, the world is on the edge of massive deflation and depression. At the other extreme is – hyperinflation. My view is that both these extremes are possible. Certainly deflation is, on balance, in play today and gaining ground as money supply is actually declining! Hyperinflation seems impossible when there is not much inflation in most economies. But … hyperinflation is a monetary event, not an economic one, and will happen on an overnight basis, not via a general uptrend in inflation data… As I write, gold is holding very near its high, as most stock markets are bungee jumping. This implies the unexpected hyper is pending, because if it were exclusively deflation ahead, gold action would be less buoyant.”
Even though gold no longer backs the U.S. dollar (or other worldwide currencies for that matter), it still carries importance in today’s society. It is still important to the global economy. To validate this point, there is no need to look further than the balance sheets of central banks and other financial organizations, such as the International Monetary Fund. Presently, these organizations are responsible for holding almost one-fifth of the world’s supply of above-ground gold.6? In addition, several central banks have added to their present gold reserves, reflecting concerns about the long-term global economy. See even more info at investing in gold.
Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008. At the same time, production of new gold from mines had been declining since 2000. According to BullionVault.com, annual gold-mining output fell from 2,573 metric tons in 2000 to 2,444 metric tons in 2007 (however, according to Goldsheetlinks.com, gold saw a rebound in production with output hitting nearly 2,700 metric tons in 2011.) It can take from five to 10 years to bring a new mine into production. As a general rule, reduction in the supply of gold increases gold prices.
Is Gold A Good Investment? Gold is a good investment for those looking to diversify their existing portfolios. The performance of gold is often the opposite of traditional investments like stocks and bonds. When these assets perform negatively, the value of gold generally increases. This trend has led many investors to think of gold as a safe investment, while further highlighting its importance in a diverse portfolio. A great example of this trend can be seen by looking at the value of gold throughout 2020 — when gold reached its highest price in the last seven years.