Gold is used as an investment in order to reduce the overall risk on an investment portfolio. The precious metal has in the past—and continues to do so—provided investors with safety against currency devaluation; it acts as one of the best hedges against inflation and provides safety in times of uncertainty. Gold is not only used by investors to diversify their risks; central banks around the world also use the yellow metal to reduce the volatility in their foreign exchange reserves.
There are many different kinds of gold investments investors can use to protect their portfolios. They may consider buying gold bullion—in the form of bars and coins (with this, they will have to keep storage costs in mind). Investors may choose to buy gold certificates, futures contracts, or exchange-traded products (with this, they will have to keep the expiry date and other specifications in mind). They can also buy gold mining stocks to diversify their risk in their portfolio. By buying mining shares, investors have to become very knowledgeable about where the mining is being done and how much does it cost to extract one ounce of gold from the ground.
Since early 2013, gold investments haven’t performed well. This is mainly due to the lower precious metal prices. However, the fundamentals suggest that gold prices will head higher. As a result, gold-related investments will see a rise as well.