We have to start by saying that gold is one of the most valuable physical commodities that depends on supply and demand.
Even though the value of gold can change very quickly, move up and down at times, it also has a habit of performing poorly when the stock market is increasing and vice versa.
We are just telling you some other sides of the gold coin you should remember before you start investing. Of course, you will be able to invest in gold buffalo coins, and use it as the part of a comprehensive investment strategy that you wish to make.
However, it is not safe to say that you will always end with positive returns, but you will be able to get more stable runs than other commodities. Gold is the safest investment if you use it the right way and that is a fact you should remember.
What Drives The Value Of Gold?
The primary use for gold is due to jewelry, and that makes it approximately 50% of overall demand. Another 40% comes from substantial investments in gold by central banks and individuals in the form of gold medals, bullions coins, and bars.
It also features technical nature in dentistry for instance. If we stop thinking about statistics, it is clear that more than 90% of gold demand is based on its intrinsic value. This is a historical significance since the world chose it as the central currency centuries ago.
The fact is that at one point of the time, the paper was just a form of saying that you have physical reserves of gold in banks. However, that particular time has passed since the flat currencies now are back by the government promises and other monetary factors.
Even though governments have decides that it is much simpler to avoid gold standard altogether that did not change the issue that gold features intrinsic value, which is perfect for safeguarding your wealth.
The best way to learn what intrinsic value is is by checking out this website: https://www.investopedia.com/terms/i/intrinsicvalue.asp. The gold is a limited resource, which means that we do not have too much of it.
Since the gold has been using for fashion and other purposes we have stated above, it is estimated that annual demand for it reaches up to 190 thousand metric tons.
On the other hand, the amount of gold in the ground is significantly lower nowadays, and the production reaches up to 54 thousand metric tons on an annual basis.
Therefore, we have a significant issue in front of us, because if you wish to get an ounce of gold, you have to dig it up. Meanwhile, no one knows how to make it artificially, even though most medieval alchemists gave his or her life to learn this particular technique.
Even though the balance between supply and demand creates the value of gold, its physical nature provides the intrinsic value, which is more important and will affect its price on the market.
It Is Volatile Investment
If we say that gold is a physical asset that we enjoy wearing as jewelry or own in the form of bars and coins, the supply and demand is something that regulates the price. However, if you wish to get an idea of what that means, you should understand the standard deviation.
This is a degree in which price of something tends to vary from the average price in some period, while the lower numbers are suggesting less price variability. In the last few years, the deviation of gold is 16, and the annual return was 4% loss.
If we put this number together, it means that gold will provide you a gain between 12% and 20% in some given period. That great range will enter a negative perspective. Therefore, the annual return tends to vary over time.
Also, investments can break this particular statistical perspective, and since gold standard deviation has been higher in the last ten years, we can say that gold is a volatile investment.
It is vital to remember that gold does not depend on stock changes and fluctuations. For instance, when the stock market is doing good, gold tends to get being, and owning gold as your only investment is a highly risky choice that you can make.
However, the combination of gold and stocks is something that will provide you value and ability to enjoy all the way.