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Is buying gold a safe investment?

A major concern for anyone with money is how to keep hold of it. Investors will often look to maximise the safety of their wealth but with so many options available to us today it can be difficult to know how to do this effectively. Bullion is a popular asset with those looking for a long-term store of wealth, but we're often asked if buying gold is a safe investment?

Is gold a safe investment?

Any investment is a balance between risks and rewards, and you should always take the time to assess these risks and make investments that have a level of risk you are comfortable with. 2021 has proven a good year for higher risk investments like cryptos and stocks. The economic fallout of the pandemic has seen huge amounts of money printing which has helped keep the values of these items high. Both however have suffered huge falls in value in recent years - or months even in the case of cryptos - and continue to demonstrate that these are risky options.

On the other end of the scale, low risk investments such as ISA's and savings accounts certainly keep your money safe. The low interest rates of recent years however means that you make very small returns each year, and with inflation rising money sitting in the bank may actually be losing value in real terms.

Is gold a safe investment?

Gold is considered a safe investment. A huge amount of investment in gold comes from individuals looking to protect their wealth from the dangers of economic uncertainty and inflation. Gold and other precious metals have been used as forms of currency and as symbols of status in jewellery and other items for thousands of years, a testament to their intrinsic value. Precious metals have outlived other forms of currency and it is this timeless ability to maintain a high value that attracts investors who believe that gold is a safe investment.

This becomes clearer when we look at the behaviour of investors and what attracts them to gold.

Due to gold's reputation as a safe-haven, investors are drawn to the precious metal when confidence in other forms of investment is low, raising the gold price and supporting the idea that bullion is a safe asset. Conversely, many investors are often attracted away from gold when the economy is performing strongly and banks, shares and other financial assets are able to deliver regular returns, often pushing the price of gold down.

This means of course that gold, like any investment, is not risk-free. The price can go down as well as up, but long-term it's performance certainly speaks for itself. This is one of the reasons gold is considered a long-term investment first and foremost. Over many years, or decades it has proven to perform well, trending up. View the long-term gold price history.

It's this slower, long-term appreciation in value that gives gold its reputation as a safe investment asset. The price can drop or rise from day-to-day but it rarely suffers the crashes associated with other options, and slowly keeps rising over time. An investors can simply buy a bit of gold, keep it safe over the years and then sell when they wish to release the value.

Please note: BullionByPost do not provide investment advice, and we would always recommend investors consult with an independent advisor if they have any concerns or questions on whether gold is the right choice for your portfolio.

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