Why Investing In Gold Is The Smart Move

May 14, 2021

Gold is or should be an important part of every investor’s portfolio. Gold has been an investment class all on its own for centuries. It has an intrinsic value based on its industrial uses and demand for it for the making of jewelry, as well as demand by investors for use as a hedge against inflation and stock market movements. Gold is an insurance policy against stock market downturns, inflation and political uncertainty. We saw in 2020 how well gold performed. When everything is going to hell in a handbasket, gold will come to your rescue. So for purely defensive reasons, you need gold in your portfolio. There are also reasons to believe that gold is entering a bull market and this will have a huge impact on its real returns in the following years. In this article, we will discuss why investing in gold is the smart move for you. 


Gold has been an investment asset for time immemorial. According to the World Gold Council, gold was at an 11-year low in terms of demand for jewelry, in 2020. This is due to the economic devastation wrought by the Covid-19 pandemic and subsequent lockdowns and recessions across the world. Yet, for the long-term investor, this low is only a blip through time. 


Gold has been used for jewelry for thousands of years. To the Incas it was the swat of the sun. In emerging markets, demand for gold is relentless, especially in China where increasingly prosperous households use it for gifts and the Chinese New Year. India is one of the biggest markets for gold because of its importance in Indian wedding ceremonies and the festival of Diwali. In these markets, gold’s importance is not going away any time soon. Thousands of years of culture will not be set aside. This gives gold another engine of growth as the Chinese economy recovers from the pandemic’s economic effects. India will, at some point, follow suit and recover. 


Another reason that demand slumped is because gold’s price soared in 2020, as investors bought up the asset as a hedge against economic uncertainty. 


When investing in gold, you need to take a long-term view. Too many people invest in gold with a short-term view, and get distracted whenever the price falls, or stays flat for periods of time. A gold thesis is seldom about the short-term. Secular bull markets are, by their nature, long-term events. They mean that over a period of years or even decades, the price will, overall, steadily rise. This does not mean that there will not be dips in the price, corrections or even sharp falls. The price rise is not one straight line. It’s janky, it’s angular. Forget the short-term and look to the long-term. Invest intelligently with firms such as Rosland Gold and build wealth for the future. 


It’s also important to be humble enough to know that the shorter the time horizon, the harder it is to predict the future. This seems counterintuitive, so here’s an example: you can’t say if you will die tomorrow, but you can say for absolute certainty that you will die. Once your horizon becomes long-term, the uncertain becomes more certain. You can’t say if the price of gold will go up tomorrow, or down, or stay flat. Yet, we can speak with more confidence about what the price will be years from now, relative to where it is today. 

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