6 great reasons to own gold

 Gold is everywhere on the planet, but not in significant concentrations. It is difficult to understand the attractiveness and superiority of gold, but gold is respected around the world for its value. Because of the respect it demands, here are six great reasons why investors should own gold.

 Gold maintains its value

 Gold has a history of holding its value. The price of gold is often volatile in the short term, but it always maintains its value in the long term. For this reason, it serves as a solid hedge against inflation and currency erosion.

Supply restrictions

 Gold is extremely rare. According to geological data, essentially all gold is found only in low concentrations in rocks. And, a new gold mine can take a decade's worth of rewards to bring in new supplies of ore, with depletion starting as soon as the first load is pulled out.

 From 1990 to 2008, a large amount of the investment gold supply resulted from gold bullion sales from the vaults of central banks around the world. However, governments and central banks are now net buyers of gold, which means that they are buying and accumulating more gold bullion than they are selling.

 Gold does not default on promise or obligation

 All governments issue fiduciary treaties on paper (dollars, euros, pounds, yen, etc.). Fiduciary treaties have no real value and are backed by government decrees that promise to meet the established value. Throughout history, governments have printed too much currency, as the US has done at high speed since 2008.

 Historically, governments have also created inflation and devalued currency purchasing power as a measure to increase trade and exports. This also facilitates debt financing and social programs, such as Social Security. The problem is that retirees receive the promised checks from Social Security with no guarantee of the amount of goods and services the checks will buy.

 Deflation

 Deep-seated deflation in one country causes prices to decline, business activity to slow, and a central government burdened with massive debt. The money supply and credit are greatly reduced and overall spending slows down a bit.

 Unemployment and economic depression become the norm. During these times, the relative purchasing power of gold soars, while other prices drop sharply. In fact, people often subsist on a street-level barter system.

 Geopolitical uncertainty

 Gold retains its value not only in times of financial uncertainty, but also in times of geopolitical uncertainty. It is often called the "product of the crisis." When a country's government is in crisis, the reserve currency collapses and it can no longer finance its deficit.

 However, the market returns to natural monetization as the means for life to continue at the grassroots level. At this point, no other major currency in the world offers any refugees, but gold becomes a universal currency.

 As government balance sheets weaken, global banking systems deteriorate, and deflation sets in, gold in a portfolio makes sense.

 Portfolio diversification

 As emerging markets have grown, the demand for gold has increased. In these countries, gold is often intertwined with culture, and new money is available to accumulate bullion. India and China are two nations that are large consumers of gold.

 Many Americans are beginning to see commodities, especially gold, as an investment class to allocate money. A characteristic of a diversified portfolio is one that has investments that are not closely related to each other.

 As bonds have a negative correlation with stocks and rising interest rates, gold also has a negative correlation with stocks and rising rates.

 Gold tends to prove its own value as money. Gold is an "insurance policy" whose value to an investor is the universal monetary value.

 The bottom line

 Gold is an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. The investment demand for sell gold has increased considerably, but new supplies from the mine will not increase in the near future, and new supplies are more likely to decline.

 Gold has historically endured as a safe and indestructible haven from the wealth of decline. Long-term gold provides diversification to a well-balanced investment portfolio.