Gold is a durable, tangible, and hard asset that stores the value of your wealth. It may offset losses due to inflation, currency debasement, or bearish times afflicting the stock market. But in general, there are four critical reasons why you should invest in gold, and they are inextricably connected.
Gold’s historical performance, industrial demand, scarcity, and zero counter-party risk are why you should diversify your investment portfolio with physical gold.
Key Takeaways
- Gold’s historical performance compared to other investments shows its ability as the only asset that acts as a hedge.
- The demand for gold will always be high. The medical industry, electronic devices, and many more rely heavily on gold.
- Gold is rare. There is not a lot of gold in the world to meet the accelerating demand. The world needs to mine more gold, but there is none left.
- Gold cannot default. It cannot fail. It cannot go bankrupt. Gold has zero counter-party risk.
Gold’s Historical Performance
Gold has been a symbol of wealth for centuries. Kings, queens, emperors, rulers, and celebrities continue to use gold to symbolize fortune and glamor.
We are not emperors or celebrities, but we are gold investors. So here is a gold investment fact.
Since President Nixon’s abomination of the gold standard in 1971, gold price per ounce has shot up 4,900 percent, compared with roughly 3,500 percent for the S&P 500.
If we look at how gold has stacked up over the past 50 years versus other asset classes such as equities and bonds, it has indisputably increased in value.
Gold has outperformed stocks in the last few decades and has risen 37.43 fold since 1967.
That is more than twice the performance of the Dow Jones index over the same period, 18.45 fold.
And in over the past fifteen years, gold has increased by 315%. In comparison, the FBNDX returned 127%, and the DJIA increased by 58% over the same period, which is lower than the numbers reported over the 30 years.
It has even outperformed the long-term and intermediate treasury. Many insist that “past performance is not necessarily indicative of future results.”
And Noble Gold agrees. That is why we need to educate ourselves about gold. Gold’s value does not only rely on its reputation.
The faith of billionaires and millionaires in gold is not solely reliant on history. Gold’s growing industrial use, scarcity, and zero counter-party risk are factors for its consistent increase in value.
Gold’s Industrial Demand
Outside of investments, gold has other uses too. At some point in the day, almost everyone is using gold.
There is gold in your phone right now. Smartphones, data servers, computers, cars, and other machines rely heavily on gold.
Annually, 1.38 billion smartphones sell throughout the world. Each phone has a little less than $2 worth of gold. That translates to $2.5 Billion worth of gold consumed annually by the phone industry.
And there are approximately 275 million units shipped worldwide by PC vendors for computers. Each device uses $12 worth of gold. That translates to $3.3 Billion worth of gold just for computers.
Gold is also being tested to cure cancer. Annually, there are more than 18 million cancer diagnoses. That is 18 million people who could potentially need gold.
Cars need gold too.
Every car and truck built today includes several computers. These electronics monitor the engine’s performance, automate hundreds of switches throughout the vehicle, and always have silver and gold as components.
There are more than 7.8 million cars manufactured yearly. Assuming there is \$120 worth of gold in each car, that would translate into \$936 million worth of gold annually from the car industry alone. And that’s just the tip of the iceberg.
Scientists are using gold to help produce oxygen on Mars. Dentists, different machines, exotic food, and many more somehow use gold.
For gold investors, this is good news.
The increasing demand may catapult gold’s value to unpredictable heights. These industries need gold. And lots of it. But the only problem that we face is that there’s not much left in the world to mine.
Gold Is Rare
If we were to melt all the gold ever mined, including all the antiques and historical artifacts left in the world, we would only be able to fill two Olympic-sized swimming pools. That is how much gold there remains in the world.
And the supply is getting worse.
According to the US geological survey, only 50,000 tonnes of gold are available to mine. Estimates vary, but this survey is the most statistically sound for measuring gold supply.
To make matters worse, no technology on Earth can produce gold in a lab the same way you can with diamonds. Diamonds as a class of material are not particularly rare.
As scientists and investors improve advanced technology that recreates natural processes, it is more likely that lab-created diamonds will be completely identical to diamonds mined from the Earth.
On the other hand, gold requires more than a process. It requires gold which we don’t have.
It literally takes astronomical events for the Earth to get more gold.
As if that’s not enough of a battle, now we have mining problems.
When Quarantine was in its early stage, many mining companies shut down. Investors then began to scramble to get their hands on as much gold as possible, causing gold to become less available.
And we haven’t recovered. We are consistently producing less gold annually.
Scarcity by itself isn’t bad. Even if there were only one gallon of gold, it won’t affect the price if no one needed it.
That’s where it gets better for gold. We don’t stop needing gold. In fact, we need it more and more.
In the last 10 years, gold demand has consistently gone up 10% even during the pandemic, and it will continue to rise, but supply won’t.
The world wants it, and the world needs it. Why? Because there is absolutely no other metal that can do what gold can do.
Gold Has Zero Counter-party Risk
Gold is irreplaceable. There is no other asset that can do what gold can do.
Gold doesn’t fail, nor does it default or go bankrupt. In other words, gold has zero counter-party risk.
We face counter-party risk in almost everything we do. When you buy a phone or a computer, there is always a risk that the device won’t function properly.
When you buy a car, it could break down a month later.
While these risks may be something we don’t even think about, it should be a different story when our finances are involved.
Suppose you hold 10,000 shares in a company called Green Technology. Let’s say the value of that stock is $40. That means you have $400,000.
Then news about the discontinuation of the company’s main product goes viral. Everyone sells, and by the time you get to your account, it has plunged to $1.
That happened recently to BeyondSpring Pharmaceuticals, a global pharmaceutical company focused on developing cancer therapeutics. It was selling around the $15 mark. The FDA then said they could not approve its chemotherapy drug.
The company plunged to $3 in a matter of hours. We are not saying don’t invest in stocks because they face counter-party risk. As established earlier, counter-party risk is in everything we do. And it’s important to diversify.
Diversify your portfolio with stocks, crypto, and real estate, but invest in a zero counter-party asset too. Gold and other precious metals don’t experience defaults or go bankrupt.
In a contract, one party may not live up to the end of their bargain. When you invest in gold, your money is safe and stored. It doesn’t fail.
That’s why it is a hedge. That’s why it is stable. That’s why countries, millionaires, and billionaires use it to protect the value of their wealth. It should be enough for you if it’s good enough for them.
Invest With Noble Gold
Gold’s historical performance, gold industrial demand, scarcity, and zero counter-party risk are why you should invest in physical gold.
You must do your due diligence and decide if an investment in gold is the correct investment for you right now. Speak to a financial advisor first, and then contact Noble Gold when you are ready to diversify your portfolio with gold or other precious metals.
The sooner you call, the sooner your wealth and retirement are protected.
The best part is that you will be appointed a live agent to help you set up your gold investment. We do all the heavy lifting for you.
If you don’t want to speak to a live person, head to Noble’s website and click the “open an account” button. After registering, a FREE Gold and Silver Investment Guide will download, explaining everything you need to know about investing in precious metals. All it takes is five easy steps!
