The Silicon Review
05 June, 2020
The World Gold Council has recently announced that central banks are gearing up to increase their buying of gold bullion. Resource World notes that this may be due to gold's proven performance during times of crisis, as well as negative interest rates, increased political risk, concerns about fiscal sustainability, and shifts in the geopolitical order.
It's not surprising then, that gold is becoming increasingly popular at this time. In fact, gold buying seems to be encouraged, with platforms like Google Pay collaborating with institutions such as MMTC-PAMP India to make buying and selling gold more accessible to the public. This partnership will allow users to buy 99.99 percent 24-karat gold via Google Pay.
Why people turn to gold during a crisis
Since time immemorial, gold has been a reliable store of value. CNBC highlights that in times of uncertainty like what we're experiencing now, gold is seen as a "safe haven" for investors looking for an alternative compared to traditionally volatile investments like stocks. In the stock market, even the biggest companies can fail, whereas investment in gold is a less risky option. Additionally, Bloomberg claims that because gold pays no interest, it's not fashionable during times when real interest paid on bonds is high. But now, when the yield from Treasuries becomes negative, gold is more attractive.
Factors that impact the price of gold
There are many factors that go into gold's perceived value. For one, when inflation rises, The Economic Times underscores that the value of currencies goes down, and people's reactionary measure is to hold money in the form of gold. When inflation remains high for an extended period, gold becomes a favorable hedge against these conditions. Additionally, supply-and-demand economics can impact gold prices as well. As with any commodity, increased demand and consumption with low supply results in the prices of that commodity rising. On the flip side, an oversupply of the product pushes the prices lower. Geopolitical assets, a weakening dollar, future gold demand, interest rates, and more, influence the value of gold.
How to invest in gold
With all that being said, gold is still a difficult commodity to buy, especially for beginners, so it's good to enter with caution. It's worth using a specialised platform to help you gain a better understanding of the market. FXCM's TradingView Pro is a network for traders and investors that helps to educate potential investors by allowing them to gather insights on gold, forex, and the like via a convenient social platform. Using platforms like this can help investors make better decisions when it comes to what they're buying. Another option would be investing in exchange-traded funds (ETF). GQ India notes that gold ETFs work just like mutual funds, except that the gold bought for you is equal to the amount you invest in them. The value of these funds then grows in line with the gold prices. And while it's a riskier move, buying shares in gold mining companies is also an alternative. It should be noted that the value is more volatile than others since it takes into account several factors, including promoter practices. This route is only recommended for people who can withstand high risks and have a deep understanding of the mining industry.
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