People have grown more aware and aggressive with their financial decisions and investments. More than their personal desire to protect their finances for their retirement age, today’s world’s financial situation and challenges have posed a bigger risk on everyone’s investments.
Surely, you do not want your hard-earned money to go to waste and you surely want to gain financial stability or to grow your wealth.
Exploring Your Investment Options
A lot of options for investments have been made available. Every option promises growth, however there is not a single investment that assures financial security. Whether you invest in the stock market or in real estate, there would always be a great risk due to the volatility of either the market or of the value of money.
Reasons to Invest in Gold
However, one investment has been proven to retain its value for centuries, across nations—and that is gold. Gold has maintained its value through ages.
High value and wealth. Unlike dollar or other paper currency, gold is perceived to have its own history of high value and wealth. Gold has also been used as a hedge against inflation for the very reason that its price tends to increase when the economy gets worse or when cost of living increases.
Diversification. Another benefit of investing in gold is its ability to give your investments diversification wherein your other investments are not closely correlated to one another; hence you will be secured whatever happens to the market.
Central Banks and their Gold Investments
Central banks have remained to be net buyers of gold. The growing trend now includes central banks of emerging markets have also ventured on diversifying their reserves by increasing their gold investments. Despite the significant decrease of gold prices during the recent three years, gold has remained to be an attractive purchase to a lot of central banks.
One of the main reasons why central banks are purchasing gold in multiple purchases would be their nature as investors. Central banks are usually strategic—they know they will be able to use gold as a hedge against policy actions. They do not focus on the current price of their investment, instead they focus on diversification. Central banks were even more encouraged to buy more even in the face of gold’s price plunge. This is not considered as a big concern for them since gold is perceived to be a long-term strategy for diversifying currency reserves.
Currently, Germany and U.S.A are the biggest investors of gold—more than 70% of their total reserves are gold. These big markets have been trusting gold for decades. Central banks have bought the most gold since 1964 and despite other investors losing their faith on gold and its value, Central banks have continued to see gold as the world’s traditional store of value.
Central banks are also net buyers of gold so they can rebalance their reserves and protect their national wealth. Central banks of emerging countries have also increased their gold investments to strengthen the growth of their currency reserves since the sovereign debt crisis have caused an impact on traditional reserve currencies such as the Euro and the U.S. dollar.
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