With more than four thousand years of history, gold is still in huge demand, not only because of its incredible beauty. Today, the value of gold is expressed not just in its industrial use but also in its investment utility, which provides a store of value and protection from inflation during periods of uncertainty.
However, how can you avoid miscalculating when investing in gold? You want not only to store value but also to increase your capital. Find out if investing in gold is still relevant in 2023, and check out the gold rate prediction for next 5 years to help you make the right decision!
Gold as an Investment
For millennia, gold has been used not only as a form of payment but also as a long-term store of value.
For some investors, holding about 5-10% of the value of their portfolio in the form of gold (physical bars and coins or exchange-traded funds (ETF)) is a reliable way to diversify their holdings and hedge against collapses in the value of stocks, bonds, and so on.
Investment Benefits from Gold
Before analysing the gold market, you should consider the positive aspects and why having it in your investment portfolio can be so beneficial.
Diversifying Your Portfolio
According to Goldman Sachs, the possibility of the economy falling into recession in 2023 equals 35 percent, which also applies to the stock market.
Unlike real estate investments, which are more likely to depreciate during such a period, gold will diversify your portfolio and reduce your exposure to risky assets to help you mitigate the risk of major losses.
Liquidity
Another key point during a recession is asset liquidity. In simple words, the possibility to sell them quickly for cash. In a difficult economic environment, such as a crisis, you can stay afloat by earning from these same assets and using the proceeds to pay for your essentials, bills, and loans.
Illiquid investments, such as stocks, bonds, and real estate, are difficult to turn into useful funds, especially when demand for them falls. Would you buy something expensive and collectable when you cannot pay your bills or buy food? Most likely not.
Gold, however, can be easily exchanged for cash, so it is a liquid asset and, most importantly, a smart investment.
Inflation Protection
At the beginning of today’s article, one of the main properties of gold as an investment asset was noted – preserving its value even during periods of inflation. Like other precious metals, gold can maintain its purchasing power, even with dollar fluctuations, in the long run.
To Invest or Not to Invest in Gold in 2023?
Of course, the question that worries you from the beginning is whether it is still worth buying gold this year.
The two biggest indicators that affect the price of gold in the market are the US dollar and the Fed’s monetary policy. Gold will only benefit if the exchange rate weakens and the Fed’s policy is curtailed.
The highest level of gold prices was recorded in 2020 at the time of the global pandemic; then, it was $2074 per ounce. Another noticeable increase was observed in 2022 due to the political situation in Europe when the price was above $2,000 dollars.
But what about the current situation? There are many assumptions regarding further changes in the price of gold. It is expected to decline to $1,730 per ounce by the end of the first quarter of 2023 but rise to $1,900 closer to the end of the fiscal year. As for 2024, the price may fall to an average level of $1,895.
According to the Canadian investment bank’s outlook report in November 2022, from the end of 2023 to the end of 2024, the price could rise from $1,800 to $1,900, and in 2025, it could average $1,875.
Conclusion
Before considering buying gold on the market, remember that even though this type of investment is smart, it does not suit everybody. If you are looking for an option that will help you maximize your investments and gain a significant profit, it is, sadly, not for you. Investors usually choose gold as a safe investment with a low level of risk.
The current situation in the world and, obviously, on the market is very unpredictable and volatile, so you cannot trust professional predictions entirely.
A great piece of advice would be to do your own research, where you will consider the market trends and news and the fundamental analysis with a wide range of specialist comments and opinions.
