Gold has given positive returns of 21.84 per cent in the past one year, while returns on Silver has been 21.05 per cent, as per a report by Motilal Oswal Asset Management Company.
The year 2023 gold may be a wise investment decision for a variety of reasons. People frequently look to gold for security in times of uncertainty, and a well-diversified portfolio is an excellent strategy to safeguard your financial future.
If you want to protect yourself against a changing economy, you should examine your finances and investment strategy. Given the inverse trend, it follows in comparison to the equities market, gold has historically been a preferred option for investors. Today, it can be purchased, sold, or invested in a variety of forms, including real gold, gold bonds, digital gold, etc.
Gold is regarded as an inflation hedge
Gold and other precious metals have long been regarded as a prudent way to counteract inflation. This is because, despite variations in the value of the dollar, it tends to hold its worth and your purchasing power over time. Gold is regarded as a defensive commodity that protects your investments but does not provide growth potential, as do many other asset classes. It is preferred during recessions or periods of uncertainty since it is considered as a hedge when people claim that nothing is functioning.
As long as inflation continues to be strong, now could be a favourable time to increase gold holdings.
In a downturn, liquidity – or the ability to quickly sell assets for cash – is critical. If you run into financial difficulties, you can sell those assets and still pay your payments and other obligations.
Gold is extremely liquid and can be traded for cash rapidly, making it an excellent investment during downturns. Because of its price stability and great liquidity, gold is an excellent asset for portfolio diversification.
Strong Asset for Future
Purchasing gold is a superb long-term investment that continues to be the best-performing asset of the twenty-first century. Central banks are buying gold to replenish reserves, and demand remains well-balanced and on an upward trend over the long term.
We all have to pay taxes on our earnings, including any profits from investments such as savings, shares, bonds, and real estate – but physical gold is an exception. Sovereign gold bonds have an 8-year maturity duration, the capital gains tax is not applicable. Also, no tax on the exchange of gold for gold jewelry which is not the case with equities.
Gold price variations may continue throughout the year as the world confronts inflation and the impact of a banking system collapse as a result of a higher interest rate environment internationally. In such a case, hedging your assets by diversifying through safer havens such as gold may be a wise choice, as long as you don’t overexpose yourself to the commodity by expecting spectacular returns year after year.
Before investing, always do due diligence through financial advisors and rigorous research to understand the cyclical nature of various asset classes and how to make sensible decisions.