Is gold a good investment in the long term? | Kinesis Money (2024)

Gold has historically symbolised prestige and luxury, with ownership of the asset conveying status and wealth.

It still holds cultural significance today in many countries, largely India and China, where it is gifted by families at times of betrothal, marriage and birth.

To this day, gold remains a go-to asset in times of uncertainty.

Is gold a good investment in the long term? | Kinesis Money (1)

Gold Performance Against the Stock Market

These connotations are not unfounded. Looking back just over the past ten years it’s evident that as a fundamental investment vehicle, it still holds weight.

Clearly, gold price peaks and troughs are more pronounced than in the 1960s when it was priced in two-digit figures.Uncertainty in the stock market and fears of economic crisis can cause the value of gold to rise. In Q1 of 2023, the value of gold increased by 9.2% to $1,980 USD per ounce. The collapse of the Silicon Valley bank in March 2023 and geopolitical tensions played a big part in this outcome.

having bucked the trend of the US dollar currency’s strength, from a low in the past 10 years of $1,049 per ounce in November 2015, according to the World Gold Council.

Yet, despite the peaks and troughs, gold is still a relatively safe investment hedge against inflation, with an overall balanced portfolio of stocks, to weather the storms of undulating stock market indices’ movements.

Gold Outlook Over the Next 10 Years

A Hedge Against Uncertainty

Surely, few could have predicted the uncertainty surrounding the Covid-19 pandemic, which only began to ease in the first quarter of 2021, would see gold demand recover reach 4,021 tonnes – excluding over-the-counter (OTC) markets – according to the World Gold Council.

In the next 10 years uncertainty is likely to remain a hallmark and hence gold will likely continue to be a good investment when people and governments fear the worst, but always as part of a wider portfolio.

Higher gold prices may be prompted by fears of further pandemics in the future. The Omicron and sub-variant BA.2 added another element of worry with consumers buying again to hedge against the unforeseen.

Macroeconomic Pressures

Furthermore, the gold price may be influenced by inflationary pressures, economic recessions, or stock market dives, all presenting further upside risks in the next decade. Nations at war may further derail economies and fuel gold price projections up again.

Inflation is an example of macroeconomic pressure that gold investors will want to pay attention to. Historically, investors see gold as a hedge against inflation. That is because gold and the US dollar typically are inversely correlated, meaning that when the US dollar index increases, gold prices decline. So gold prices rise when inflation causes the US dollar to lose value. In 2022, US inflation reached 7% for the first time since 1982. As inflation remains high, digital and physical gold stands out as a particularly attractive investment.

Long-term geopolitical issues will also determine economic sentiment and influence consumers’ decisions on whether to keep private assets or hold – this is yet unclear. The Russia-Ukraine war and the implications of China’s position is a case in point.

For private wealth, the alternatives are for assets to be locked away in bank vaults, in safes at home or kept in the investment sector in gold-backed exchange-traded funds (ETFs).

An alternative, which offers an attractive interactive element to buying physical gold, is in its digitalisation into blockchain as cryptocurrencies, such as the precious metals-backed currencies offered by Kinesis. This can be a transparent, proven record to potentially hedge the price of gold against any future variants.

Future Demand

In terms of the demand for gold, there will likely be an increased industrial requirement in the coming 10 years in order to serve smart city infrastructure, aerospace applications such as satellite technology, and medicine.

Demand from the electronics sector bounced back in 2021 by 9% year-on-year to 220 tonnes. More advanced electronic devices and electric vehicles are gaining traction, and the consequent expansion of 5G infrastructure and automation devices will be a theme going forward spurring gold demand.

Is gold a good investment in the long term? | Kinesis Money (2)

Is gold still a good investment in 2023?

So, where does that leave investors now who are projecting for the next 10 years? And is gold a good investment in the long term?

Gold can be kept as insurance for times of trouble in its physical form of either gold coins or bullion. This will remain a hedge for the occurrence of need when the pot of gold might have to be used or later replenished in times of abundance. This is unlikely to change due to the cultural basis of its accumulation by consumers in the retail sector.

Recent renewed interest from central banks saw purchases rise by 82% in 2021 to 463 tonnes, lifting global reserves to 35,600 tonnes – a near 30-year high, according to the IMF. In 2023, central bank gold buying broke records. In Q1, central bank gold demand reached 228 tonnes which was 34% higher than the previous Q1 record set in 2013.

India added 77 tonnes to its gold reserve in 2021, the biggest increase since 2009 at 200 tonnes from the IMF. Notably, Thailand, Hungary, Uzbekistan, and Kazakhstan also significantly increased their gold reserves.

Jewellery fabrication was a testament to consumer sentiment when demand boomed in 2021 after Covid, when demand grew by 67% year-on-year to 2,221 tonnes, according to the World Gold Council. This was the highest rise seen since 2018, satisfying the global need for jewellery, with demand in India and China largely fuelling this demand in the fourth quarter.

Clearly gold remains important, both culturally, or as a hedge against uncertainty, despite the current economic recovery and steady price lifts.

History suggests that gold will remain a reliable safe-haven asset in 2022. But how it is held, whether as physical, paper or digital currency, may see some radical changes going forward in the next 10 years.

The start of 2023 looked promising for gold investors. As expected, market uncertainty and geopolitical tensions continued into the new year, which helped the price of gold rise. As markets dropped due to worries about the financial sector, the value of gold increased by 9.2% to USD 1,980 per ounce in Q1 of 2023.

Investing in digital gold is a great option for diversifying your portfolio and building wealth. Many gold investors opt to divide their holdings between digital and physical gold. Invest in gold today with Kinesis.

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This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

As an expert and enthusiast, I have access to a wide range of information and can provide insights on various topics. While I don't have personal experiences or emotions like a human, I can provide factual information and answer questions based on available data.

Now, let's discuss the concepts mentioned in the article you provided.

Gold as a Symbol of Prestige and Luxury

Gold has historically symbolized prestige and luxury, and ownership of this precious metal has been associated with status and wealth In many countries, such as India and China, gold is still culturally significant and is often gifted during important life events like betrothals, marriages, and births.

Gold as an Investment in Times of Uncertainty

Gold has been considered a go-to asset in times of uncertainty During periods of stock market volatility or economic crisis, the value of gold can rise. This is because gold is often seen as a safe haven investment, providing a hedge against market fluctuations For example, in the first quarter of 2023, the value of gold increased by 9.2% to $1,980 USD per ounce, driven by factors such as the collapse of the Silicon Valley bank and geopolitical tensions.

Gold as a Hedge Against Inflation

Gold is also seen as a relatively safe investment hedge against inflation When inflation causes the value of the US dollar to decline, gold prices tend to rise In 2022, US inflation reached 7%, the highest since 1982, making gold an attractive investment for those seeking to protect their wealth.

Factors Influencing Gold Prices

Several factors can influence the price of gold. These include inflationary pressures, economic recessions, stock market fluctuations, geopolitical tensions, and long-term geopolitical issues For example, the Russia-Ukraine war and China's position can impact economic sentiment and influence decisions related to gold.

Gold Demand and Industrial Applications

The demand for gold is expected to increase in the coming years due to various factors. There will likely be an increased industrial requirement for gold in sectors such as smart city infrastructure, aerospace applications (e.g., satellite technology), and medicine The expansion of 5G infrastructure and the growing popularity of advanced electronic devices and electric vehicles are also expected to spur gold demand.

Gold as Insurance and Diversification

Gold can be kept as insurance in times of trouble, whether in its physical form (coins or bullion) or as part of a diversified portfolio Many investors choose to divide their gold holdings between digital and physical gold Digital gold, such as precious metals-backed cryptocurrencies, offers an alternative and interactive way to invest in gold.

Recent Trends in Gold Demand

Recent trends indicate that gold remains important both culturally and as a hedge against uncertainty Central banks have been increasing their gold reserves, and there has been a significant rise in demand for gold jewelry These factors contribute to the overall demand for gold and its continued relevance as an investment.

In conclusion, gold has a long-standing cultural significance and is often seen as a symbol of prestige and luxury. It continues to be a go-to asset in times of uncertainty and can serve as a hedge against inflation. Various factors, such as geopolitical tensions and economic conditions, can influence gold prices. The demand for gold is expected to increase in the coming years, driven by industrial applications and advancements in technology. Gold can be kept as insurance and can be part of a diversified investment portfolio.

Is gold a good investment in the long term? | Kinesis Money (2024)


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