InvestorQ : Why is it that gold continues to be a favourite among investors as an asset class? What explains this interest in gold?
Mahima Roy made post

Why is it that gold continues to be a favourite among investors as an asset class? What explains this interest in gold?

Answer
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Aditi Sharma answered.
7 months ago


There are various reasons for the lure of gold but broadly they can be broken up into five justifications.

· Gold is indestructible. Almost every ounce of gold that has been mined in history is still available in some form. That is what makes gold unique.

· Gold is one of the most effective diversifiers. Gold rarely moves in tandem with equity and debt. So adding gold reduces your risk in uncertain times.

· Gold moves in prolonged phases but is also stagnant for long periods of time. However, over longer periods of time, it does manage to better inflation.

· Gold prices are never as volatile as equities. By adding gold to your portfolio, it makes your overall portfolio less risky.

· Most central banks like the Fed, ECB and Bank of England have increased liquidity post 2008. This could lead to debasement of these currencies. Gold can be a useful asset in such times as it normally moves contrary to the US dollar.