The massive 9% drop in the price of gold that occurred on the 15th of April has scared many investors. But it would be unfair to judge gold's value as an investment based on that incident alone, considering that the precious metal has been one of the most rewarding assets for investors in the last decade. Moreover, the gold price drop should not be judged in isolation, since other financial markets have also tumbled around the middle of April. The price of silver dropped by 12%, and stock prices fell across the board.
Challenges of Investing in Gold
Investments in gold have always been tricky, especially short term ones. Long term investments in gold generally pay off, which is why many wealthy people and companies and even nations buy large amounts of gold when they don't trust their other assets anymore. The problem with gold investments is that it's hard to determine what influences the price of gold, and that makes predictions quite impossible.
There's no easy way to estimate the value of gold. For the average person it certainly has an intrinsic value, but for a value investor this does not count. Some investors in fact go so far as to consider it an asset whose value cannot be estimated, and avoid it altogether.
Two factors that generally drive the gold prices include inflation and real interest rates. Another crucial factor is the likelihood of an economic crisis, because gold has been traditionally considered the last resort for investors who want to protect their assets from a crisis.
Gold, Still a Good Investment
Despite the recent drop in gold prices, you should still consider the precious metal as an asset worth choosing for long-term investments. But assessing the value of gold and making the right investments in it is an art that only a few master. For this reason it's recommended that you enlist the help of professional financial advisers.
Compare the Financial Markets has the professionals and the tools you need, and can help you make the right investments in gold. To find out more contact us.
