While investing, an investor cannot risk everything. There should always be a provision for safety. In the event of market volatility, he should have something reasonably left out. Investing everything in one type of asset is a great risk. It washes out the entire capital in the event of uncertainty. Hence diversified investments are required. Mostly the safest investment options have low returns and liquidity. But there is an exception since ancient times. This exception takes the form of investment in gold. Let us analyze whether the gold investment is still a safe haven:
What makes people believe Gold Investment as safe Haven?
Basically, we assume an investment to be safe if it is unaffected by market fluctuations. Investment in gold not only stays unaffected but appreciates even when the market is volatile. The prices constantly keep rising. Hence there is a common belief that gold is a safe haven. Continue reading to know more about this.
Gold can be a safe haven only for a limited period. The study says that this is normally around 15 trading days. This is because the scenario in markets is changing now. Investors who invest major portions of their stakes on gold, have to sell their holdings at a lower price when equity market crashes. The crash in equity market affects their liquidity levels unreasonably. Hence, they would be forced to sell their gold holdings at lower prices.
The above findings were a total reality during 2008 crisis situation.
The price of gold moves inversely proportionate to the value of USD. Investors try buying gold during periods of recession. But they are likely buying at a high price and the returns may not be so good.
Gold performs low when the other assets perform very well. Hence most of the investors now say that cryptocurrencies are safer than gold. It is easy to trade them using Ethereum code.
In terms of liquidity too gold is not too great. The convertibility to liquid cash is not so fast.
But this glowing precious metal which is rust-free is mined still across the world. Countries have gold reserves guarded by their central banks. Safeguarding gold involves cost.
In the future, there are predictions and already growing signs of trade wars among nations. This will make the investing community go in for gold as a safe haven. But in reality, gold prices are affected by political happenings. With the upcoming political crises which are frequent in nature, the future of gold investment may not be as bright as a cryptocurrency.