5 Reasons Why Bullion is Attractive During Political Instability
Why do people invest in gold?
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It is a common statement in many money dealing establishments. Gold is always better than money, especially during political turmoil. It sounds so much like a line in a movie, but it does make sense in real life. Forget that it is a pain to carry and will attract all sorts of unsavoury characters, but there is wisdom behind what they say. Here are a few reasons why bullion is better during political instability.
The Value of Gold
Gold is always at a generally fixed value. When a country is politically unstable, there is a huge change that the currency of that country will often decline or lose value. The value of gold remains the same. So during these times it is no surprise that businesses demand gold payments instead.
Political Unrest equals Higher Gold Prices
When people lose their confidence in their government, they lose their trust in the value of their monetary system. When this happens, gold becomes a fall back payment option and most of the time, in situations like this, the price of gold goes higher as demand increases.
A Better Investment
During a political crisis, most investments generally suffer a decline. The stocks of that country often fall as companies make less profit due to the unrest. Investors see political unrest as the short term risks so during these times, there is a decrease in investments and stocks. Gold prices, however will remain the same or in some cases even increase in value.
Gold is valuable because it is limited in supply. A gold investment has a very good chance of getting higher gains, especially when there is a high demand. So most gold investments are sure ones and are often mixed with other investments to reduce risks.
Gold is Universal
In times of political unrest, many things are uncertain. Government instability brings out the doubts in any honest business. Money loses value and investments crash. It becomes a race trying to minimize the company losses. This is the reason why investors have a small supply of this precious metal in hand. When the country's currency fails and loses value, gold will always remain as an accepted currency worldwide.
This is why in a politically volatile environment, money loses value and gold becomes the default currency. Businesses can go on, trade is still possible, but the medium or currency shifts to gold.
Any investor will make sure that their investment is protected and the returns are within the limits that they want. In times where there is political instability in a country, a shrewd businessman has the option of converting his assets to gold, this way the investment is protected and with minimal to no losses.
This is why in these uncertain times, gold is a better choice than currency. The value of gold remains relatively the same not unlike money which can lose its value in situations like this. It is a safe investment and can be used as a currency on its own.
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