We know that keeping your financial future secure is one in every of the foremost vital goals of any prudent investor. Throughout economic uncertainty, social unrest, or worldwide crisis, gold and silver are crucial assets and fundamental investments of a well-balanced diversified portfolio.
Some gold drivers to keep your eye on in 2019 are broken into four categories below:
- Wealth and economic expansion
- Market risk and uncertainty
- Opportunity cost
- Momentum and positioning
Whether you decide to capitalize on gold or silver’s performance in the short-term or as long-term savings vehicle, the demand for gold or silver traditionally has been correlated to strong economic growth. As investors seek shelter in times of heightened risks, gold and silver are strategically added to balance risk and provide a safe-haven.
Why gold, why now
Perceptions of risk, the value of the USD, and the influence of economic reforms weigh heavy and may influence gold’s performance in the near term. As it stands, many investors believe that these factors likely will continue to make gold attractive and respond well to these pressures. This is where investors can benefit from its performance.
In the long-term, gold will be supported by the development of the middle class in emerging markets, its role as an asset of last resort, and the ever-expanding use of gold in technological applications.
In addition, central banks continue to buy gold to diversify their foreign reserves and counterbalance fiat risk, as emerging market central banks tend to have high allocations of US treasuries. Central bank demand for gold in 2018 alone was the highest since 2015, as a wider set of countries added gold to their foreign reserves for diversification and safety. As Bloomberg stated in their recent article on January 30, 2019 “central banks are on the biggest gold-buying spree in half a century.”
Central banks bought more bullion last year than anytime since 1971, when the U.S. ended the gold standard.
Governments added 651.5 tons of gold to their coffers in 2018, a 74 percent increase from the previous year, according to a report from the World Gold Council.
Furthermore, there are four key characteristics that make gold a valuable strategic asset by providing investors:
- Solid returns
- Low correlation to major asset classes in both expansionary and recessionary periods
- A mainstream asset that is as liquid as other financial assets
- Historically proven track record of improved portfolio risk-adjusted returns.
Solid Returns:
Gold is not only useful in periods of higher uncertainty. Its price has increased by an average of 10% per year since 1971, when gold began to be freely traded following the collapse of Bretton Woods.
