Why buy gold as an investment?
Across centuries gold's attraction as an investment has remained as constant as the yellow metal’s properties.
Gold’s diversification benefits and ability to reduce risk at the portfolio level have continued to fuel demand from astute investors worldwide.
Over the long term the precious metal has offered several key benefits to investors:
1. Strong long-term returns
The gold price has delivered long-term returns of almost 9% per annum since the early 1970s.
2. Strong outperformance in low real interest rate environments
Gold prices have risen in 18 of the 21 years when real Australian cash rates have been 2% or lower, as they are today. The average gain during those years has been more than 20%.
3. Demonstrated hedge against equity market falls
Gold has historically been the highest performing single asset class in environments where equity markets suffer their biggest corrections.
4. Currency diversification
Gold offers a de facto foreign currency exposure in an Australian investor’s portfolio and it has historically benefited from any decline in the value of the AUD.
5. Liquidity and simplicity
Gold is highly liquid and simple to incorporate into a portfolio. It is accessible to all investors and can be purchased in amounts as little as AUD 50.
While other asset classes offer some of these benefits, gold is arguably the only asset that offers all of the above attributes in one easily accessible investment.
Given the economic and financial market environment investors face today, we expect that gold will continue to attract attention from investors around the globe.
To learn more, download our Self-Managed Super Fund (SMSF) White Paper which outlines the case for gold in a modern investment environment particularly for SMSF trustees.
How gold ETFs keep fees and costs low
Costs are a critical factor for investors to consider as the trading spreads incurred when buying and selling an asset eat away at the returns generated. One of the advantages of gold ETFs is that they are inexpensive both from a management fee, as well as a trading cost perspective.
Gold remains solid as bitcoin melts
The price of bitcoin crashed in May and has struggled to make headway since.
Benefits of holding gold in Australian dollars
Does it matter what currency you buy gold in? While long-run returns and the role that gold can play in a portfolio tend to be similar irrespective of the currency here's some things to watch out for.Source: Benefits of holding gold in Australian dollars