Through the global pandemic and recession, investors have been looking for safe havens to keep their savings secure. While these safe havens vary in asset classes, a good portion of investors have chosen to invest in gold.
As a form of currency, gold has a longer-standing history of value in the market. In particular, this is due to its tangible nature and limited availability. These factors can be what makes it so desirable for areas of economic instability and recession.
As a tangible asset, gold can be held in the hand, making it much more real to investors than currencies, stocks, and ETFs. Gold also has a limited amount of able to be mined, making it quite valuable when compared to other tradeables.
That being said, gold has its fair share of limitations as an asset. Firstly, its value can be determined by more than just its scarcity. In addition to the demand and supply, it reflects the socio-economic environment of the day.
Gold is also categorically bound by laws and regulations, making it less liquid than its sister asset, silver. Furthermore, the price of gold is largely driven by lack of confidence in traditional safe havens, making it a much less predictable instrument.
Finally, gold itself is not necessarily a growth asset, meaning investors may be limited on returns. Because gold doesn’t pay a dividend, investors have to rely solely on capital appreciation to make money.
Despite all of these factors, gold can still be a viable safe haven in areas of economic instability and uncertainty. Given the turmoil of today, it may be something investors should consider as part of their portfolio.