Diversifying Your Investment Portfolio with Gold – A Global Forecast for 2019
Concentrating your savings in a single asset is a risky move. If it fails to give good returns, all your efforts at wealth accumulation could be in vain. Yet, storing your money under a mattress or in a piggy bank will only affect its purchasing power. And by the time you near your retirement (perhaps 10, 20 or 30 years from now), the impact of inflation and market sell offs on your stashed-up money could be more destructive than you think. So, the only solution is to invest wisely and not haphazardly.
Why Should You Consider Diversifying Your Investment Portfolio?
As an investor, you need to be prepared to experience different economic situations, both good and bad. While it’s important to take advantage of bull runs in the real estate and stock market, it’s even more important to be prepared for the downside. Since 1970, the world has witnessed major changes in the economy as the US suffered several recessions, including the “Great Recession” of 2008. No matter what type of industry you invested in, your portfolio was likely affected. One of the best ways to mitigate this investment risk is to create a diversified asset portfolio, including gold.
Investment Portfolio Diversification – Why Gold?
Diversification means spreading your investments across a range of asset classes, such as bonds, stocks, mutual funds, real estate and gold. That way, your investments are independent of each other and safe against global financial clash. For example, if equity markets fail to give a decent return, you can compensate it with gains from investing in precious metals.
One of the best things about investing in gold is its capacity to bring asset diversity to your portfolio. Considering some gold along with other assets such as stocks and bonds, acts as an insurance against severe market turmoil. Whether in the form of jewellery, coins or ETFs, gold performs it’s best when the markets are at their worst. Over the past five decades, investors have seen gold prices rise and the stock market fall during inflation. Since gold holds its value in U.S. dollars, a decline in the dollar will result its price hike.
In 2008, the real estate market crash caused most stocks to decline. The value of gold dropped along with stocks, but within a short time, it managed to bounce back. For those who held gold in their investment portfolio, it was no less than a lifesaver. Since ages, gold is considered to be a safe-haven asset and could be a worthwhile investment in the coming years.
2019 Market Forecast for Gold
Gold went through a lot of ups and downs in 2018. Juan Carlos Artigas, Director of Investment Research at the World Gold Council, said “This year, we see higher levels of risk and uncertainty across four key metrics: global stock market volatility; potential increases in inflation; political and economic instability in Europe; and increasing concerns about a global recession.” Taking the important macro factors into consideration – economic reforms, financial market volatility and geopolitical disturbance – gold is likely to shine through the rest of 2019.
Poorly performing equity markets and an unstable property market may put the US economy at stake. Trump’s stance against China (as many may believe) is an alarming stepping stone towards a potentially devastating trade war. A weakening US economy will affect the value of dollar, which could increase the market value of gold.
As we become more interconnected and dependent on each other through global business, the condition of a country’s economy will certainly affect other nations around the world. While we don’t know the exact impact of this trade tension between US and China, it’s likely that we’ll see a significant rise in the demand for gold. According to the World Gold Council, “factors like these could influence buyers to favour gold as an effective diversifier”.
When Is the Right Time to Buy Gold?
Considering the fact that gold is a safe store of value during times of uncertainty, it’s a great place to invest in. But when is the best time for gold buyers?
As for investors who seek best returns on their investment, it’s important to keep an eye on the economic condition of their country. This largely depends on how things turn out in terms of national geopolitical factors and its impact on the global economy.
During inflation, chances are that the value of your national currency will drop. The sooner you recognize such situations, the higher are your chances to make a profit. Stock market declines and political unrest also have a negative effect on your national economy. When stock markets crash, investors use their gold investments to cover their losses. This is the perfect time to make the most of the unstable market.
Like any other kind of investment, gold too has its ups and downs. However, including gold in your investment portfolio is important to hedge against inflation and financial crisis. Depending on your country, political situation, retirement needs and personal goals, your gold diversification should range anywhere between 5 percent and 30 percent. However, it’s advisable to seek help of a certified wealth advisor in this matter.