Gold has always been considered the best tool to avoid risks in the investment market. However, how much do investors really know about gold? Ever wondered why gold is such a popular choice as a safe-haven? Perhaps this article can give investors a better understanding of gold.
Basic introduction to gold: rare and precious metals,
as we all know, gold is a golden yellow and corrosion-resistant precious metal. But why is gold more valuable than other precious metals? That is because things are rare. Due to the small and non-renewable reserves of gold, and the difficulty and high cost of mining, the rarity of gold makes its price high. In addition, compared with currencies, gold will not depreciate. No matter it is the past, present or future, gold is equally valuable. Even if there is an economic crisis, the price of gold can still stand firm or even rise steadily. Coupled with the increasing market demand for gold, gold has become an investment tool suitable for long-term value preservation, risk avoidance and inheritance of wealth.
Investment characteristics of gold: hedging tool
There are many investment tools that can be used as a hedging tool in the market. How does gold stand out and become a leader in hedging tools? In fact, this is related to the concept of modern investment management. Under this concept, the investment portfolio is deeply influenced by the "Capital Asset Pricing Model (CAPM)", and the goal of the "Capital Asset Pricing Model (CAPM)" is how to allocate assets under the same risk to maximize investment returns. Generally speaking, the overall risk of the asset portfolio is determined by adjusting the proportion of different investment products in the portfolio and the risk correlation coefficient (Correlation) between investment products. Among the many investment products, gold is one of the few investment tools that has a negative risk correlation coefficient with the stock index trend. This means that the price of gold moves in the opposite direction to that of stocks, which usually tends to rise when stocks fall. Therefore, this feature means that adding gold investment components to the stock portfolio will help reduce the risk of the entire portfolio, making gold a safe-haven tool favored by investors. Whenever the international political situation is unstable, most investment tools, such as funds, stocks and real estate, will be severely impacted, increasing the risk of investing in these assets. At this time, investors' risk aversion takes the dominant position, and they will turn to invest in gold to avoid market risks.
Reasons to invest in gold: Fight against inflation
In addition to its excellent hedging function, investing in gold actually has other benefits. First, gold is the best safe-haven asset against inflation. When a country's inflation is severe, the currency will depreciate, and major central banks around the world will implement quantitative easing politics to stimulate the economy and fight recession by printing money. Due to its own financial attributes, the value of gold will rise with inflation, thus offsetting the losses caused by inflation to investors. Second, the gold investment market is difficult to manipulate. Due to the regional nature of the stock market, there are often cases of artificial manipulation of the market. However, the gold market is a global market, and it is difficult for individuals or financial groups to manipulate it. Therefore, the price of gold can well reflect the actual supply and demand status. Finally, the gold market is less prone to crashes than other investment markets. The real estate and stock markets are always at risk of crashing, and if that happens, investors will lose their money. Gold is a non-renewable rare metal, and its supply will only decrease over time, so the price of gold will tend to rise. Even if there are some fluctuations in the middle, gold will be a positive trend in the long run.
Furthermore, today's international capital markets, especially the global stock market, often experience large fluctuations as the Sino-US trade conflict worsens. Investors' concerns about stock market volatility are bound to increase their safe-haven demand, thereby allowing more room for gold prices to rise. The gold trading provided by Hantec Forex is to track the international gold market in real time. If you want to know more information about the gold market or foreign exchange investment details, you can visit the official website of Hantec Forex.
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