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Top 5 reasons gold is better investment option than stocks

Gold pricesGold plays a historical role in the economies of various nations, although it is not a principal form of currency, but still gold has solid position. The long-term investment in the gold will be a valuable addition to your portfolio because of the constant fluctuation in the gold prices. Gold was used as a universal currency for hundreds of years; in fact, it was used as the reserve currency of the world. The gold is a solid inflation prevaricate, and known as a liquid asset. It is ideal for long term investment because the chances of drops in the market may offer more room to earn a profit. The stock market declines and political turmoil are the leading factors for the devaluation of the currency of your country.

Top Reasons to Invest in Gold than Stocks

There are various reasons to invest in gold and one of the top reasons is high profitability. The addition of this commodity in your portfolio will be really valuable because the gold is high in demand for thousands of years. There is a consistent rise in the gold prices in USA, and there are various other benefits that one can enjoy by investing in gold:

Gold is an Excellent Hedge for Inflation

Gold is an excellent hedge for inflation because the prices of gold tend to high with the increase in the cost of living. Unlike the stock market, forex market and any other market, there is no need to worry about the inflation of gold. Gold prices may inflate a little here and there, but it usually has an upward trend. The money that you invest in the gold will remain safe and protected. The gold is famous all over the world; therefore, it is a universal commodity. During 1946 to 1980 and 2012, the real return was -12.33% for stock compared to 130.4% of gold.

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The inflation can have negative or positive impacts on stocks based on the monetary policy. The unexpected inflation can increase the volatility of the stock movements. As the inflation increases, it may affect the purchasing power of the dollar and decrease the interest of people in the stocks.

No Risk in Deflation

Deflation is the period when the prices go down, the activities of the business tend to slow, and the economy suffers from the heavy burdens of debt. This situation is very favorable for the gold because the gold prices go up while other prices dropped down frequently.

The demand of stocks among investors and banks may reduce in the deflationary economy because the investment may suffer due to the increase in money circulation.

Supply Constraints

The sale of gold bars from the vaults of global central banks is the major source of gold since 1990s. The selling was slowed down by the global central banks in 2008. The production of the new gold has been also declined since 2000. In short, it may take almost 5 to 10 years to start the production of new mines. As a result, there will be a reduction in the supply of gold and increase in the gold prices. It will be good to focus on gold instead of the stock market.

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The constant supply of stock in the market may increase or decrease the value of shares. The price change may cause due to the difference between supply and demand. There can be a situation of uncertainty in the stock market.

Increase in Demand

There is an increase in demand in the previous years because the gold is entwined into the culture. India is on the first number in the use of gold because they prefer to give jewelry of gold to each other. The China saves gold bars traditionally; therefore, there is an increasing demand of gold in all economies. It is more beneficial to invest in the gold rather than the stock market.

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In the stock market, you can’t expect the constant increase in the demand of a particular stock. The reputation of the company and the rival business organizations are the biggest factors to determine the demand and value of the stock.

Portfolio Diversification

Diversification is a key to success in the investment because you need to find different things that should not correlate to each Other. There is a negative correlation of gold with the stock, and you can include it in your portfolio. A proper combination of stocks, gold and bonds can reduce the risk and instability. You can also invest in the stock market because there are some proofs in which the stock was more powerful than gold.

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About Emaad Qureshi