Gold As A Safe Haven
Why is Gold a Safe Haven?
Gold has lasted longer as a store of value than just about anything else that doesn’t have practical, everyday use. Its status as a mainstay of the world’s economic system has never been in question, even down to the present day. Most nations use fiat currency now. But gold is still in use, especially by investors who are averse to risk.
Why has gold remained such a safe haven for investors and regular people alike from the time of the Pyramids till now?
A Safe Haven in Times of Trouble
To understand gold’s role today, we need to understand what a safe haven asset is.
Markets go up and down, and in times of great economic distress investors go running for the safest assets they can find — something that has been shown to be stable over a long period of time. Investors prioritize interest-bearing assets and growth assets when times are good, but when times are bad they look for ways to safeguard what they already have.
Those assets may change over time, but there are a few that have stood the test of time. Currencies of stable nations may be a store of value. Shares of companies that do well regardless of whether times or good or bad (such as healthcare or food) may be safe havens too. One of the most common assets used currently are U.S Treasury bills, commonly called “Treasuries” or “T-Bills”.
But gold has lasted longer than any of these.
Gold’s status as a hedge and safe haven has been steady for centuries. Nations may have moved away from precious metals, but they still have value. And when tough economic times come, gold is one of the most important assets for investors who want to safeguard their money.
Gold is usually what’s called a “negatively correlated asset.” It usually performs better when the market is down and worse when the market is up. There are other commodities like this as well, but gold is the best known and most stable.
Prices for gold change regularly, and when times are good gold isn’t as much of a growth investment as other assets. But as part of a diversified portfolio, it can be a vital hedge.
There are several properties that make gold a uniquely important safe haven.
First, it is rare. There are only about 244,000 metric tons of gold that have been mined ever in human history. Contrast this with over 700 million metric tons of copper and you can see how rare gold is proportionally.
Gold is also nonreactive, which makes it ideal for money. Unlike metals like copper or iron, gold keeps its luster and does not change much over time.
In addition to these other properties, gold is ductile. It’s easily melted and easily worked, making it usable in a variety of shapes. That also contributes to the reason it’s been in use so long — ancient cultures may have had a hard time with other, harder metals, but gold’s ease of working made it readily usable.
Liquidity also plays a role. Gold is much more liquid than many other commodities. It can be more easily sold than many assets, especially when economic times get hard. Real estate may drop in value and be hard to offload. Stocks may need to be dropped at a loss. Gold is liquid and steady.
Using Gold as a Hedge
Having gold as part of your portfolio is an essential part of surviving dips and recessions. It safeguards you against the economic shocks that can come from too much exposure to the market.
Take some time to research what gold can do for you. Talk to your investment advisor. Find out what’s right for you, your risk appetite and your investment strategy. And consider using OneGold for your precious metals investments.
OneGold allows you to invest in an easy, safe, convenient way. You can buy precious metals of any type and know they are safe and stored in a vault managed by Sprott and APMEX, two of the most trusted names in precious metals investing. And you can cash those precious metals out in whatever form you’d like. You can even leave them in that vault for extra liquidity to get into and out of gold, silver or platinum whenever the market goes up or down.
It’s the easy way to do gold investing. Try it today.
A guide to investing in gold.
A guide to investing in silver.