Is Gold Investing During Recession a good Idea?

By Alex / Published on Sunday, 26 Feb 2017 07:46 AM

Gold is a safe form of investment in times of economic uncertainties. Some of these uncertainties include high inflation and recessions among others. There are a number of reason as to why gold is a safe investment. For starters, gold has intrinsic value. Currencies may appreciate or depreciate according to the performance of the economy. However, gold is never affected by such uncertainties. During recession, many individuals prefer gold investing as opposed to stocks. Negative market developments lead to the rise and fall of share prices. In such a scenario, gold is a safe investment for preserving the value of different assets.

An investor in such a scenario may engage in speculative buying of gold as he or she diversifies the investment portfolios .In times of real negative rates, gold is an attractive investment. Historically, gold has been used as a form of currency for many years. Bank notes and coins were backed by gold stored in banks. Over the years, the price of gold has risen. This is why many banks have gold reserves. There are different ways through which an individual may invest in gold. For starters, the person may invest in gold stock companies. There are two main categories of gold stock companies. The first category entails companies which track the prices of gold.

Alternatively, the person may invest in a company which invests in gold mines. Many gold stock companies are hedged. In this scenario, an increase in the price of gold will not necessarily lead to an increase of the company’s worth. Hedging goes a long way in reducing risks arising from falling gold prices. However, the person may also invest in an unhedged company. Through this, his or her gains will be more. Secondly, the person may invest in physical gold. The main types of physical gold include bullions, coins and jewelleries. Bars and coins are the most common types of investments. There are two main categories of gold coins.

This includes   sovereigns and kruggerands. Sovereigns are more expensive than kruggerands. This is because gold sovereigns are smaller, attractive and have historical value. On the other hand, kruggerands are consistent in quality thus making them popular among small investors. Bearing in mind, that gold is a bulky precious metal, investors are increasingly turning to online trading. Online gold trading is a convenient way through which one can increase his or her investment portfolio. Before embarking on online trading, one should open an account with a reputable stock trader.

In addition to that, the individual should consider his or her capital outlay. Like many investments, gold investing is speculative in nature. It is thus wise for an investor to expand his or her portfolio. This may be done by investing in other commodities. The person should also bear in mind the nature of gold investments .An investor may choose gold coins, bars, or jewelleries. Different gold trading companies have different regulations. Some companies give individuals an option of staying with the gold. Lastly, gold investing has high liquidity.