The yellow metal also makes a habit of performing poorly when the stock market is doing well. But gold is the ultimate store of value, according to precious metals expert Ronan Manly of Singapore’s BullionStar.
“What this means is that gold retains its purchasing power over long periods. Gold’s purchasing power is not eroded by inflation as it is an inflation hedge,” the analyst told RT. “In contrast, fiat currencies such as the US dollar are not stores of value. Fiat currency purchasing power is consistently eroded by inflation, and over time fiat currencies, such as the US dollar, lose nearly all of their purchasing power relative to gold.”
Widely accepted as a safe haven, gold is commonly seen as financial insurance in times of crisis, conflict or war, with investors rushing to the asset during these periods, according to Manly. He compares the precious commodity to a “safe harbor when there is geopolitical turmoil.”
The expert points out that the physical commodity has a low correlation with the prices of other financial assets and securities, as it is less impacted by business and macro-economic cycles compared to most other assets.
“Gold therefore also aids portfolio diversification since by adding an investment in gold to an existing portfolio of other assets such as stocks and bonds, the overall volatility or risk of an investment portfolio can be reduced while boosting portfolio returns,” Manly said.