In the Past Whenever there was a huge fall in the stock price most of the time the price of precious metals Gold and Silver surged. Many buy gold in their portfolio treating Gold as an Investment
By the end of this article you will find answers for two questions
- Why did gold prices increase during Crisis?
- Why Do People Buy Gold?
During the time of crisis, various sectors of the economy badly get affected. This hampers world economic growth. Value of stocks drastically falls. Due to this sudden change, investors pull out their money from stocks and start buying Gold. There are many reasons for this
- Currency has high chances of losing its value because paper money can be printed more unlike gold.
- Stocks and Gold are negatively Correlated.
- Gold acts as Safe Haven.
- Most of the world currency is Fiat and Fiat Currency has a history of failing during crises.
These are some of the reasons that cause the gold prices to raise. During crises, governments usually reduce interest rates to boost the economy and print more money.
Because of reduction in rates, interest gains from recurring deposits, FDs and PPF also fall. On the other hand, returns from the Stock market also reduces because of the crisis.
Due to the above scenarios, Investors search for another instrument to invest their money for better returns and Gold provides that opportunity. That is why people love to buy gold as an alternative to stocks.
In the Corona Crisis period also investors are doing the same as they did in previous crises i.e, buying gold.
Many have this question – “If depositors are investing in gold then how the progress of the nation takes place?”
The answer is straightforward – Investors always look for value. If there is no value in stocks they shift their investment habits and look for better options. Any Crisis does not stay for a lifetime.
Because of Crisis nation progress might get hampered for some time. But after the crisis ends, the investors usually invest in stocks which results in the progress of the nation.
I hope you understood why people buy more gold as an investment during the times of Crisis.
If you want to invest in gold, a complete guide is provided in this article – “How to Invest in Gold Online?”. Consider reading this