Aside from being a safe haven investment, gold has been considered by many investors as one of the safest means to manage the risks in their investment portfolios. That is because most of the time the stock market is moving directly the opposite direction of the gold. So if the stock market declines, certainly gold will move upward.
But recently this trend seems to break down, when stocks declines gold tend to fall too. This put a question whether gold is still a good choice to investment in gold.
So here is an article by Hao Li which explains why gold remains a safe asset.
Gold Remains a Safe Asset
While chances of a third round of U.S. quantitative easing measures have dimmed, the World Gold Council said Wednesday the yellow metal’s price outlook is positive due to its global appeal and value in hedging against both inflation and deflation.
In the first quarter of 2012, U.S. economic data improved and minutes from the latest Federal Reserve interest-rate-setting meeting indicated that officials were less supportive of monetary stimulus.
These developments were perceived as negative for gold because loose U.S. monetary policy, which pushes down the value of the dollar and other currencies that peg to it, is one of the biggest factors that drove up gold prices in recent years.
Still, gold managed to rise 8.6 percent in the first quarter of 2012 against the dollar because other factors supported prices, the London-based WGC said in its latest quarterly commentary.
Rising oil prices, for example, stoked inflation fears and pushed up the price of gold, a traditional hedge against the waning purchasing power of fiat currencies.
Gold is also a hedge against asset deflation, stated the WGC. The dual fears of inflation and deflation in the sovereign debt crisis-plagued euro zone, therefore, have been supportive of the yellow metal.
The WGC also pointed out that aside from the U.S. and its policies, emerging market countries like China and India are also big gold buyers.
Research from GMO LLC, a Boston-based asset management firm, shows that emerging markets were the biggest consumers of gold in the world from 2000 to 2010.
Developments in China and India in first quarter 2012, however, were arguably bearish for gold’s outlook, as China’s weak economic data and the Indian government’s announced import duties and jewelry tax hikes cast doubt on the strength of future demand from the two countries.
The WGC, nevertheless, concluded that gold “continued to exhibit a positive (upside) skew” in the first quarter of 2012.
Prices of gold fell 0.57 percent, or $9.40, to trade at $1,641.90 per ounce in afternoon trading on Wednesday in New York.
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Despite the current situation in the market still gold remains a safe asset that one can rely on in times of economic uncertainty. It is still the best safe haven investment with the lowest investment risks in the market.
So for those who are still thinking whether or not they should invest in gold, authorities already confirmed that gold is a safe asset investment. So before gold price rise up again, make sure that you already placed your hard earned asset in an investment that is guaranteed by authorities that is safe from inflation and currency devaluation. Get a gold investment now.