An alternative investment is an asset that does not fall into one of the conventional investment categories. This class includes art and antiques, fine wine, property, classic cars, cryptocurrency, luxury watches, gold coins, and numismatic collectables. Adding alternative investments into your portfolio reduces exposure to any single asset or risk. However, some of these alternatives present unpredictability, instability and introduce further exposure. This is where gold pulls ahead of the pack, and a distinction can be drawn.
Throughout history, few investments have rivalled gold in popularity as a hedge against almost any kind of trouble, from inflation to economic upheaval or currency fluctuations, to war. Rael Demby, CEO of The South African Gold Coin Exchange & The Scoin Shop, believes that diversification can help reduce the impact of market volatility and says,
“We live in a volatile world. Gold offers a safe haven asset that always maintains value. Krugerrands, gold coins and collectables distinguish themselves as the ultimate alternative asset.”
Here are some practical reasons to think about owning some gold today.
Gold is tangible and moveable. As a precious metal, gold has unique properties due to its rarity, durability, fungibility, beauty, resistance to corrosion, divisibility, and malleability. In addition, gold is a highly liquid asset. Other alternative assets are fairly illiquid. For example, investors might find it difficult to sell a rare bottle of wine, a vintage car or an antique.
Gold’s supply is limited, supporting its role as a store of value—the worldwide supply of gold increases by about 1.5% each year. Gold’s unique properties, mentioned above, make gold a superior store of value. Gold has emerged as the clear winner store of value after thousands of years of competition against other commodity currencies.
History and Stability:
Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. Since ancient times, people have valued the unique properties of the precious metal. It is the metal we fall back on when other forms of currency don't work, which means it always has some value as insurance against tough times.
Central banks and governments across the world own gold as a reserve asset. Moreover, since the Financial Crisis, central banks and governments have been buying more gold to diversify their currency reserves and reduce their reliance upon the U.S. dollar as a reserve asset. If central banks buy gold because they believe gold can serve as a store of value, why should others act differently?
Many people out there are rightly worried about where they can hide from the volatility of the global financial system, the deteriorating value of fiat currency and inflationary concerns and are looking for the assurance of a reliable “store of value.” A store of value is an asset that can be stored and reliably retrieved later with its purchasing power intact. Demby, adds
“There are reasons to feel jittery - geopolitical instability, inflationary concerns, pressure on global financial systems. However, adding some gold coins into your portfolio remains an option and Krugerrands in particular”.
Originally minted in South Africa in 1967, it was the first of its kind in the world. The Krugerrand was the first modern gold bullion coin - consisting of one troy ounce of fine gold, in a coin blended with a copper alloy for hardiness, to yield a 22-karat gold coin of which over 50 million ounces have been sold globally. This has made the Krugerrand the most widely traded and most liquid gold bullion coin in the world.
So what’s the bottom line? Gold should be an important part of a diversified investment portfolio. It has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies and thus is an asset well worth considering.