In uncertain economic times, individuals with significant cash assets are in effect holding on to liabilities. This might sound counterintuitive, but take a look at the United States Dollar today. Its value is slipping relative to other currencies as the nations politicians bicker about its future. Not only does this depreciate the purchasing power of your cash savings, it also makes imports brought into the country costlier.
So what can you do to protect yourself against the reduction in value that your cash savings are going through? You can invest your money in a business or property and hope that the value of that asset goes up. You can purchase foreign currency that is trading at a low rate and sell it back when it is higher and pocket the difference. Another good alternative is to purchase gold, which is a time proven method of storing wealth for future use.
At first glance, this seems a little ridiculous. A business or even a rental property will constantly generate a revenue stream (if managed correctly), while gold just sits there, doing nothing at all. You cannot eat gold, you cannot wear it and you sure as heck cannot sleep under its “roof”. So what makes gold so attractive as a store of wealth? Why has this material been utilized as a inflation-proof asset for so long?
The answers to these questions are a bit complicated. To begin with, gold has many aesthetic qualities which render it superior to any other metal when it comes to displaying signs of wealth. It is a finite resource that is high in demand but low in supply. Since time immemorial, the goal of those with massive amounts of wealth has been to show others how successful they are, and what better way to do so than to purchase gold, an expensive, albeit almost useless commodity?
If we fast forward to modern day India, we will get another piece of the puzzle. Gold plays an important role in Hindu culture, especially in events such as weddings and festivals. As such, India’s recent economic growth is producing a new class of consumers that are purchasing more and more gold. Factor in the rise of China and other Asian powers, with the decline of traditional assets in the Western world, and you see that the stage is set for a rush to purchase as much gold as is possible.
The material has already surpassed most projections on its market value and it continues to climb steadily. While some fear an asset bubble being formed, other investors see the inherent “storage” value of gold and its ability to protect a portion of their assets through gold.
Now if you are a small time investor or even a middle class person with some savings, you can still get in on the “gold rush”. There are many places where you can purchase gold coins, necklaces and jewellery, which hold their value because they are made of gold. Even a small purchase can net you handsome returns if you get in while the price is low and sell when it is high.