Throughout history, gold has been viewed as a special and valuable commodity. Nowadays, owning gold can act as a hedge against both inflation and deflation, as well as a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty. Because gold maintains its value over the long term, that means it can be easy to sell because its value is unlikely to be lower than what was paid for it.
In addition, gold has existed for so long that there is always bound to be a market with willing buyers. Stock market volatility aside, the value of the dollar has been steadily declining. What does that mean for anyone with cash reserves in their bank? The corresponding loss of purchasing power. Precious metals, whose value has increased in recent years, can compensate for that loss, as investors use the inverse relationship to protect their portfolios.
Precious metals are a way to protect against inflation and can even add stability to retirement accounts. While many people think that buying gold means buying physical ingots, that is not the only, nor the best, way to buy gold. Investors who want to buy gold are often looking for a backup plan in case the traditional stock market collapses. These are some of the main benefits of gold, but investment, like all investments, is not without risks and drawbacks.
Central banks have been buying huge amounts of gold for the past decade and now hold 20% of all the gold mined as money on their balance sheets. That's one of the reasons why legendary investors, such as Warren Buffett, warn against investing in gold and instead advocate buying companies with cash flow.
