For those who are investing in gold, you may have noticed the increase in gold price. Personally my gold investment has turned profitable as I have been investing for many years with a minimum purchase of 1 gram per month. Many people claimed that gold is a form of investment that is used to hedge against currency & inflation. With the current market situation, gold price seems to be reacting with it & you may notice that there is a spike in gold price since April 2019.
The last time gold prices hit an all time high in this millennium was during 2011. That was partly because of the USA Credit Rating was downgraded followed by Euro-zone debt crisis.
Why Should Gold Be Part Of Your Investment Portfolio?
As an investor, I believe in diversification among asset class. Personally, I am allocating 5% of my investment portfolio towards gold. If you refer below for the history of gold price vs S&P500, you may notice that their chart movement is not correlated with each other. What does that mean? It means that investing in both different assets are bound to different risk or return.
2. Hedge Against Inflation & Currency
Generally when the currency weakens especially USD, that’s when gold price will increase. History has shown that whenever there is inflation, there will be increase in gold price too. FYI, back in those ancient days, gold use to be the currency of many ancient kingdoms & many modern countries used to adopt to gold standard as well.
3. Economic Uncertainty
There are many uncertainties that are happening recently such as Trade War between USA & China, Brexit & many others. Gold usually performs better in a situation like this which results in many investors investing in gold during economic uncertainty.
4. Demand vs Supply
As you may know, there is a limited supply of gold in this world. The World Gold Council estimates there are around 190,000 metric tonnes of gold that are mined. With limited supply & higher demand, gold prices will definitely rise.
5. Gold Value
Gold is usually associated to luxury or safe haven by our grandparents or parents. They will usually buy it in form of jewelry & inherit that to their next generation. Some of them even invest in physical gold bars. Aside from that, gold can also be used for industrial purposes.
As mentioned earlier, currently I am allocating 5% of my portfolio to gold. Aside from investing with CIMB Gold, I have also invested in HelloGold. Prior to HelloGold existence, CIMB Gold has the best spread between buying & selling. Since I was introduced to HelloGold, I find that their user interface to be really useful especially their app is fully dedicated to gold investment.
You may also checkout my past post on How To Invest in Gold in Malaysia