Gold prices are on the rise again, and investment analysts are once again trying to figure out what is driving the popularity of gold. They seem mystified that investors would seek out the yellow metal when there are so many other places for them to invest their money. There are bonds, ETFs, blue chip stocks, and real estate investment trusts. Why would anyone choose gold?
There are many reasons to choose gold, but there is one reason that stands above the others at the moment. Gold represents safety and security, so rising gold prices merely reflect investors’ desire to have something a little safer in their portfolio than simple stocks. While this may frustrate stockbrokers and analysts with investment products for sale, there is no doubt that investors do not have to look far for reasons to flee to safe havens.
What Scares the Average Investor?
There are plenty of things going on in the investment world and the broader universe to make investors start quaking in their boots. Headlines alone – even without knowing the stories behind them – all seem to speak to turmoil, trouble, and tough times ahead. It’s enough to drive investors into underground bunkers, much less safety investments.
None of this is helped by sudden spikes in market turmoil. In response, gold prices naturally move higher as investors turn their backs on the chance to dig deeper into a market that seems to be in a perpetual state of flux. The average investor wants to see steady price movements, not 1,000-point swings and volatility levels that are through the roof.
The lack of honesty and transparency about different elements of the investing process doesn’t help, either. Major investment houses are getting regularly hauled in to testify before Congress and other judiciary and regulatory bodies. This hardly bodes well for investor confidence, as no one seems to be able to give a straight answer as to what is going on with his or her investment products.
Hedging Future Bets
In the midst of the lack of transparency, the turmoil, and the volatility, investors are naturally choosing to hedge their bets on the future. While 5 years ago it looked like everything was going to turn up roses in the world on the wings of rising real estate prices, now the future looks a tad unpleasant. Belt-tightening and retrenchment are the norm, not the exception.
As no investor wants to contemplate a future where they run out of money, gold prices are shooting up. The yellow metal provides a way to have a store of wealth on hand that poor decisions by investment managers or bureaucrats can’t destroy. It’s a hedge against uncertain governmental policies, unrest in the world population, and the lies of Wall Street leaders.
Thus, while investment analysts may be mystified as to what is driving the average investor into gold, those living in the real world hold no such puzzlement. Gold is a safe haven, and in these uncertain times, investors are seeking safer and more tangible assets to hold.