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Gold and silver are not assets for everybody. If you want to go down the road more frequently traveled, you can put your money in a mutual fund and forget it. But that will expose you to the same risks and losses everyone else suffers. While stock market downturns aren’t predictable, they are inevitable.
That’s not to say that stocks aren’t an important investment. They make up the majority of most investors’ portfolios, but to invest in them exclusively is =exposing yourself to high risks and minimal diversification. In order to diversify their positions, investors turn to other assets, including precious metals, to take a defensive position against those inevitable losses.
Gold and silver prices have been robust throughout the pandemic, and while some think that the return to normal could mean reduced demand, there are also several factors working in bullion’s favor.
If precious metals sound like the right investment for you, you can buy gold and silver directly from bullion dealers like Global Bullion Suppliers.
#1 Stock Market Uncertainty
Uncertainty is one of the biggest reasons that investors start looking for less conventional assets like gold and silver.
High volatility is something that not a lot of investors can stomach. Whether they’re everyday investors or institutions, no one likes to see their money acting like a roller coaster. Unfortunately, that’s often what the stock market is like.
Gold and silver offer an alternative and one that tends to do well when indexes perform unpredictably.
#2 Inflation Concerns
Gold and silver have long been viewed as inflation hedges, preserving their value in the very long-term against the decreasing value of a dollar. While your cash savings lose value, gold remains valuable, in part because so many investors turn to gold when high inflation makes holding cash a bad deal.
There are growing signs that high inflation is coming back in the post-pandemic world. The economy over the past year has been kept on its legs thanks to hundreds of billions in federal aid. Despite vastly reduced consumer spending and confidence, it’s kept the worst of a recession at bay – but such moves may come at a cost that’s yet to be paid.
As things return to normal and the economy recovers, there’s going to be a lot more currency floating around and some worry that could spur a big jump in inflation.
#3 Low Bond Returns
One of the most popular conservative assets is the bond market. Bonds are fixed-income instruments that are effectively lending money to a corporate or governmental borrower. The income they generate is interest on that loan until the bond matures.
As long as interest rates are higher than inflation, bonds can provide modest but reliable growth. The risk is that inflation will pick up and negate those gains, known as negative real interest rates.
The performance of bonds has less to do with high or low-interest rates and more to do with the difference between interest rates and inflation. Negative real interest rates can happen in either high or low-inflation environments.
Even in the present low-inflation world, many bonds are returning negative yields, part of the reason demand for gold has proven relatively steady.