What is so special about gold and why does it still figure so prominently in the global economy? The main reason people buy gold is because it is a safe haven during an economic crisis. Gold is the best solution against a potential stock market crash. Gold has been used as a form of currency since 643 BC.
This gives people the emotional feeling that it will be worth more than paper currency. The physical supply of gold is relatively inflexible in the short term with respect to price. This means that demand will not increase.
This is because gold is needed and it takes a long time to get gold from the earth. The gold and investment in gold bonds in India market is most suitable for arbitrageurs who can take advantage of short-term price changes regardless of the price level of the metal.
These are professional investors who have enough money to withstand any financial ups and downs. This should be a warning to the average investor. When many investors believe gold is a safe haven and the global economy is unclear, gold’s growth becomes real.
However, it is almost impossible to guess how far this will go, or for how long. Most financial planners will tell you that the best hedge in turbulent times is not gold or any other single asset.
Instead, you should have a diversified portfolio that suits your goals. Your asset allocation must support these goals. But even a well-structured portfolio should have no more than 10 percent of its investment in gold in India.
If you want to sleep well at night, investing a large chunk of your portfolio in gold is not the way to go. Still, most financial planners advise putting a small percentage of your investment in gold to achieve diversification.
What is gold in the financial world?
Gold is an element classified in the metal group. It’s incredibly soft and pliable. The ductility of gold is one of the main reasons it is used in jewellery making. Gold is a commodity that is sold based on supply and demand.
Physical gold is usually traded in the form of a bullion or coin with the stamp of the gold it contains and its purity. Gold is actually quite common in nature, but hard to mine.
For example, seawater contains gold, but in very small quantities. Thus, there is a big difference between the availability of gold and the amount of gold in the world.
The World Gold Council estimates there are about 190,000 metric tons of gold above the ground and about 54,000 metric tons that can be economically recovered from the Earth using current mining technology.
But advances in mining methods or substantially higher gold prices could change that number. For example, gold has been found near underwater thermal vents in quantities that suggest it would be worthwhile to benefit if gold prices got high enough.
The precious metal is usually mined from the ground. While gold can be found on its own, it is much more common with other metals, including silver and copper.
The gold mined by miners today enters into a number of different industries. The largest of these is jewellery, which accounts for about 50% of gold demand. Another 40% comes from direct physical investments, including in gold used to create coins, medals and gold bars.
This category of high demand includes individuals, central banks and, more recently, ETFs who buy gold on behalf of others. The remaining gold demand comes from industry, for use in things like dentistry, heat shields, and tech gadgets.