Why should you buy gold?

Everyone has their own reasons for where they decide to put their money, and gold can be a great way to protect against inflation and economic ups and downs. It also adds variety to a portfolio, helping to lower overall risk since it usually doesn’t move in sync with other assets. Gold is a popular choice as it holds its value over time, making it a generally reliable way to preserve wealth. It’s also used in a wide range of industries internationally, which makes it easy to sell as there’s persistent demand in the market.

With modern technology making gold safer and easier to own than ever before, let’s look at a few reasons why physical gold remains popular.

1. Demand for gold is increasing

In August 2024, gold reached a record high of US$2,530.30 - marking an 18% increase year-on-year. Predictions expect new highs to be reached in 2025, but why is this happening? Gold demand is driven by multiple factors. Two major trends are around the increase of wealth in countries where gold plays a large role in traditions.

In China, gold bars are a traditional form of saving. In India, the second largest gold-consuming nation in the world, gold is given as gifts to celebrate major triumphs and life milestones - such as business openings or at weddings.

Gold is also used in the production of electronic components, such as connectors, switches and relays, as it’s highly conductive and resistant to corrosion. This makes gold essential to companies building smartphones, computers and televisions.

With both Chinese and Indian economies expanding rapidly, and advances in technology continuing to drive mega cap stocks, it is expected that gold demand will continue to increase in the foreseeable future.

2. Gold reduces portfolio risk

Gold is a popular asset for hedging and reducing overall portfolio risk due to its unique relationship with other asset classes. With a low or even negative correlation to popular assets like stocks and fiat currencies, gold’s value often maintains or rises when other instrument prices are faltering.

Its a highly liquid asset that is known for maintaining its purchasing power over time, even when inflation is eroding the value of currencies or other assets. This makes gold an effective hedge against inflation risk, and also protects against market downturns where the liquidity in other assets may be constrained.

If you’re building a portfolio that’s primarily focused on more volatile assets like currencies and shares, many experts recommend to assign at least 5-10% to gold or similar commodities to create a higher chance of generating wealth over time.

3. The value of gold is not linked to governments

Throughout history, gold is seen as a safe haven where prices either remain stable or are driven up by economic uncertainty and geopolitical tensions. Gold is universally recognised and accepted, regardless of the political or economic situation in any particular country. Its value doesn't fluctuate based on a single nation's financial decisions, making it a reliable asset for international trade and wealth preservation.

This is in part because gold has been recognised as a valuable asset for thousands of years, giving it an inherent worth that isn't tied to the performance of any particular government or currency. Gold - unlike fiat currencies – is not subject to inflation, interest rate changes, and government fiscal policies. Governments can print more money or alter currency values through monetary policy, but they cannot create more gold. This makes gold a relatively stable store of value.

Although 2024 has been turbulent for many markets, gold has been following a primarily bullish trend. It is often called the “crisis commodity” due to its popularity when confidence in governments decreases or world tensions are on the rise. This is because gold is often sold against the US dollar, so when the dollar drops - gold becomes relatively cheaper.

4. You can buy gold at various weights and sizes

Another benefit of buying gold is that you can decide the amount or quality that best fits your needs. With a range of sizes on offer, from small 1 gram bars to large kilo bars, gold is accessible to an incredibly broad audience.

This means you can enter the gold market at price points that suit your financial situation, making it easier to gradually build your gold holdings. Buying smaller weights can allow for more flexible decision-making, as they are typically easily to sell again if you’d like to. While smaller units of gold offer more flexibility, larger gold bars tend to have lower premiums and storage costs per ounce. This can allow for large amounts of wealth to be stored in a compact, easily manageable asset.

Whichever approach suits you, many experts advise to start small and regularly buy gold to build up your wealth strategy. If you’re new to buying gold, read our beginner’s guide on when are the best times to buy gold for some handy tips.

5 .Technology is making gold easier to own

The development of secure mobile apps is revolutionising gold ownership by offering several key benefits. More people can access gold ownership with simple apps that let you buy, sell, gift, deliver or hold gold from anywhere at any time. This eliminates the need for physical visits to gold dealers or banks, and provides instant access to live prices on investment-grade gold.

Gold purchased through apps is often stored in secure digital or physical vaults, which prevents the need for users to manage physical storage - reducing the risk of theft, loss or damage while ensuring easy access to their gold holdings when needed.

Apps also provide real-time updates on gold prices, allowing users to respond faster to market trends and news. Users can also decide if they’d like to buy gold as single grams, or in larger sizes if needed, most apps offer flexible weights to suit a wide range of users. It’s also free to sign up for most mobile gold apps, which offers an incredibly low entry barrier and encourages potential gold owners of any age to start generating wealth with gold.

Generally speaking, gold remains a strong asset for wealth preservation and risk management, especially in an increasingly volatile global market. We recommend that when buying gold at any size, it’s important you look for quality assurance such as gold certificates. All investment-grade physical gold should be at least 22k (95.8% pure) and registered with a respected federal authority.