Whenever we make an investment, we must think about three requirements: If it is profitable, if it is liquid and if it helps us to diversify and add value to our portfolio. In this case, gold, which has been used effectively as money for many centuries, fulfills these characteristics goldco. And it is that money must, in turn, meet three requirements to be solid and practical:
Although gold as a unit of account is impractical, we see that it beats fiat money, because gold is a value in itself, and paper money lacks it entirely. Furthermore, gold is not a financial asset, it is a real asset, with intrinsic value. Although it is considered a haven asset, and has a reputation for being only bought when there is a big crisis, gold is more than that. It will give stability to your portfolio, offering good returns and reducing the volatility of total investments. It is not the perfect investment and, like any other asset, it has its ups and downs. But that's where our knowledge of the health of the market and the charts comes in, to correctly choose the entry point. For example, in the 1980s and 1990s, gold became the least profitable asset, because they were years of prosperity and prosperity. At times like this, it is a personal task to know how to anticipate a change in the cycle to take advantage of buying at the lowest possible point of that fall. If you think about it, it makes sense. Gold may not be the asset that appreciates the most, but it is the one that manages to be more stable over time. And when inflation rises, gold not only gains value intrinsically, but the dollar has devalued and you will have to use more dollars to buy the same gold. Another reason to think of gold as an investment is that combined with equities and fixed income, we can increase our profitability by halving volatility and increasing diversification. One of the arguments against gold is that you can't do anything with it. It actually has several uses, but the best one is that it is a store of value. That it is used in a high percentage for jewelry (around 40%), and in the same proportion for industrial processes, is not relevant, because what is important is the value it stores for the simple fact of being a scarce product with a high ratio of stock -to-flow ratio. The total production of gold throughout history is estimated at 170,000 tons, which would be the stock, and the extraction and production of gold each year can be around 3,500 tons, and this would be the flow. If we divide them, we see that the ratio is 48. The higher the ratio, the more scarce gold is and will help increase its price. Although this is not a fact that you should take into account, because when the price for this reason increases, more resources can be devoted to exploiting the mines because the sector has earned more, and the following year more gold will be extracted and the price will go down. That is why gold is not considered "valuable" only because of its scarcity, but because its annual production, compared to the total existing stock, is very low. You can consult this data and much more at the World Gold Council.
2 Comments
10/19/2022 02:45:06 pm
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10/19/2022 03:27:32 pm
Although gold as a unit of account is impractical, we see that it beats fiat money, because gold is a value in itself, and paper money lacks it entirely. Thank you for the beautiful post!
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