o3 BLOG | Investing
Best Reasons to Invest in Gold in 2021
Investing in gold and other precious metals plays an essential role in diversifying a larger investment portfolio. Gold is one of the world’s first forms of currency and due to its physical properties and its ability to withstand the elements, it is considered one of the most valuable tangible assets one can have. Historically, gold has held its value and often increases in value in uncertain economic times. After the 2008 financial crisis, gold saw an increase, while the rest of the stock market saw a steep decline. In 2020, during the midst of the coronavirus pandemic and economic uncertainty, the value of gold went up 24 percent, marking the best year-over-year growth for the precious metal since 2010. While the global economy continues to recover from COVID-19, sudden changes such as the threat of new variants can emerge at any time, which can cause another surge in the price of gold. The lull that gold is currently experiencing is the perfect opportunity for you to participate in gold investment. We have come up with the top five reasons to invest in gold in 2021 over other alternative investments.
- Gold holds its value
As we had mentioned earlier, gold has a history of maintaining its value and even increases during times of economic uncertainty. Unlike other metals, gold doesn’t corrode and can be kept for years. Not only does gold withstand economic uncertainty, it often outperforms other investments in times of geopolitical uncertainty. Often referred to as the crisis commodity, gold holds its ground when political tensions rise — during the rise of the European debt crisis at the end of 2009, the value of gold increased. By 2011, gold hit an all-time high of $1895 when the value of the Euro plummeted, leaving many countries in the EU in debt. Due to its stability, gold offers substantial profits over the long term compared to other assets.
- Gold acts as insurance
As with any other alternative investment, the gold market is speculative and can be volatile. However, gold has consistently been a safe haven for investors globally compared to other alternative assets. As part of a diversified portfolio, gold is an excellent hedging instrument against a falling stock market, currency weakness, or inflation. Gold can protect you in the event of another economic downturn and essentially acts as your portfolio’s insurance during precarious market conditions.
- Gold is a tangible asset
Something that makes gold investments unique is that it is a tangible asset that you can preserve and pass on in the future. The traditional way to invest in gold that is still in practice today is by purchasing gold bullion, such as gold bars or coins. Canadian investors can buy gold bars through major banks, coins through the Royal Canadian Mint,and through independent gold dealers.
- Increasing demand for gold in technology
Gold plays a significant role in technology and innovation. As the technological landscape continues to evolve, the need to transmit information quickly and with precision grows. The metal is highly conductive and resistant to corrosion, making it a prized material in the production of electronics, such as computers, smartphones, and medical devices. Further, with the advancements of space technology and the adoption of space tourism, the demand for gold will inevitably increase as gold is used in space shuttle circuitry. Gold is also an effective temperature stabilizer and is used to reflect infrared radiation.
- High Liquidity
In many countries, gold holds emotional and cultural value. Many Asian countries use gold as a traditional form of saving, and in India, the second-largest consumer of gold in the world, the value of gold goes up in October, as people purchase gold jewellery for wedding season. Gold is a very liquid asset, and because there is always a market for it, people can liquidate any amount of physical gold for cash.
As with any other alternative investment, the gold market is speculative. However, unlike cryptocurrency, gold’s security has been tested over time and has stood strong during major financial crises. Although gold can be volatile in the short term, history suggests that it will always hold its value in the long term. As we are still experiencing unprecedented times, experts predict the value of gold to climb even higher by the end of the year, suggesting the potential of high returns ahead. Regardless of your investment goals, gold is a price-stable asset and is a proven hedge against inflation and times of financial uncertainty, and plays a key role in any strong portfolio.
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