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Gold

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk.

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Introduction

Gold is respected throughout the world for its value and rich history, which has been interwoven into cultures for thousands of years. Coins containing gold appeared around 800 B.C., and the first pure gold coins were struck during the reign of King Croesus of Lydia about 300 years later. Throughout the centuries, people have continued to hold gold for various reasons.

Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases.

In previous years, increased wealth of emerging market economies boosted demand for gold. In many of these countries, gold is intertwined into the culture. India is one of the largest gold-consuming nations in the world. Demand for gold has also grown among investors. Many are beginning to see commodities, particularly gold, as an investment class into which funds should be allocated.

Gold should be 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. Although the price of gold can be volatile in the short term, it has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering.

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Why Invest In Gold

Gold has unique properties as an asset class. The diversity of gold-backed and gold-related products means that gold can be used to enhance a wide variety of individual investment strategies and risk tolerances. Retail buyers are embracing gold's investment properties. Investors of all levels of experience are attracted to gold as a solid, tangible and long-term store of value that historically has moved independently of other assets.

Gold has also become more readily accessible, due to the development of a range of products, which investors can include in their own portfolios. Investors also make use of gold's lack of correlation with other assets to diversify their portfolios and hedge against currency risk.

World Gold Council's analysis shows that gold can be used in portfolios to protect global purchasing power, reduce portfolio volatility and minimize losses during periods of market shock. It can serve as a high-quality liquid asset when selling other assets would cause losses. The World Gold Council is a global authority on gold and gold markets, and produces high-quality research on what drives the gold market, and the merits of investing in gold.

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Saving For The Future

For small savings or a more substantial long-term investment, buying gold or gold-backed financial products protects wealth and can increase risk-adjusted returns. Having a small amount of gold within a balanced investment portfolio can potentially reduce its overall risk, helping to protect against market shocks. While it is reassuring to have a physical asset of enduring value, investors buy gold for many other sound financial reasons.

In turbulent times, gold is resilient. The amount of available gold is constrained and cannot be expanded at will, as is the case for fiat currencies through expansionary monetary policies – especially in times of financial and economic crisis. Additionally, unlike a stock, where the underlying company can go out of business, or a bond, where the issuer may default on a coupon or redemption payment, gold has no credit risk.

Demand for gold continues to outstrip supply. Jewellery and technology applications make up more than 50 per cent of demand, and most gold is bought in the world's fastest-growing emerging markets. China and India account for more than half of all gold purchases, annually. Newly-mined gold can only meet about two-thirds of current global demand. In addition, central banks are no longer net sellers of gold, so the rest of the demand is currently fulfilled with recycled gold. With demographic and economic trends predicting increasing wealth and expanded populations in the world's two largest gold markets, gold demand has the potential to continue rising.

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How To Invest In Gold

There are many ways to invest in gold. Different products can be used to achieve a variety of investment objectives. Investors can buy physical gold through coins or bars; or they can buy products backed by physical gold, which offer direct exposure to the gold price; or they can buy other gold-linked products, which are directly related to the gold price but do not include ownership of gold.

Some of the examples of these gold investments are Gold Accumulation Schemes, Gold MF, Gold ETF, etc.

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