Investors have traditionally turned to gold because of its reputation for stability. In seasons where conventional markets trend toward instability, investor interest in gold increases. The uncertainty in today's economy is driving investors toward gold.
"Investors using gold to enhance the diversity in their portfolios have seen better than expected performance over the past few years," shares Jai Bifulco, CCO of Kinesis Money. "It has provided all the benefits that it has shown in the past, as well as stepping in to mitigate the losses caused by emerging issues such as central banks becoming increasingly cautious about engaging with bond markets."
Bifulco's diverse commercial and operational experience spans the FinTech, precious metals, mining, financial services, investment, and trading spaces. As a founding member of Kinesis Money, he plays a leading role in driving the adoption of a truly ethical, global monetary system, which he believes will shape the future of precious metals and the monetary space.
"The shifting dynamics in today's markets position gold as an essential component in modern investment strategies," Bifulco adds. "It checks all the boxes for investors who are increasingly looking for ways to preserve and grow their wealth in a financial environment that has become more and more difficult to predict."
Gold remains a reliable hedge against inflation
After experiencing a reprieve from the high rates triggered by the COVID-19 pandemic, investors may soon need to grapple with the effects of elevated inflation once again. The typical response to such economic pressures is to add more gold to portfolios.
"Investors look to gold to offset the impact of inflation because it is typically inversely correlated to the US dollar," Bifulco explains. "As inflation causes the dollar index to decline, the value of gold is pushed higher."
Two factors drive gold's inverse correlation to fiat currencies. First, its supply is limited since producing new gold bullion reserves is a lengthy process. Secondly, the value of gold is not tied to a specific economic policy, which limits the control federal governments can have on the gold market.
New investment tools make gold more accessible and flexible
Gold has become a more common element of investing strategies as modern investment tools have made it more accessible and flexible. Whereas obtaining gold once required investors to pay substantial sums and deal with the inconvenience of storing physical assets, today's investing landscape furnishes investors with easier and more cost-effective options for adding gold to their portfolios.
Gold Exchange-Traded Funds (ETFs), for example, allow investors to buy shares of funds that hold physical gold bullion, gold futures contracts, or stocks of gold mining companies. The shares can then be traded on stock exchanges, just like company stocks are bought and sold.
Platforms that allow investors to digitize their gold holdings are also emerging, making adding gold to an investment portfolio more convenient and secure. The platforms provide real-time updates on portfolio values and streamline the process of buying and selling gold.
"The most advanced digital platforms allow investors to not only store gold but also earn a yield from it," Bifulco explains. "This enhanced gold's utility as a growth asset."
The International Monetary Fund says the global economy is entering a new era marked by "epistemic uncertainty and policy unpredictability." As investors navigate the transition, gold has the potential to play a key role in strategies that provide stability, flexibility, and profitability.
