Last updated: September 11, 2019
Topic: FinanceInvesting
Sample donated:

Gold is historically one of the most common investment. Gold has the
characteristic to hold it is value in the long term and today, it is still one
of the asset included in the portfolio.


Gold provides value by providing a good diversification. This is due to
the fact that its price has a negative correlation with the stocks and other
financial assets.

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As it is
uncorrelated to the market, investors will be more attracted to gold
investments during a financial and political uncertainty. Since 2007, the price
of gold constantly increased 2011 from 631$ ounces to $1735 by the end of 2011.


Recent news
also led to an increase in the gold price. Starting from Brexit referendum and
as consequence the cut in interest rates from the Bank of England that lead the
price to increase to $1364 by the end of the summer of





“Gold is like a canary in the coal mine. It signals
problems with respect to currency markets.” Alan Greenspan

In the days before the USA election the price of gold
was also expected to increase further however it sharply decreased just after election
of Donald Trump. This is due to the declaration by the Fed to increase the
interest rates.

From the beginning of 2017 the scenario changes, gold
reflects the worldwide political instability and the demand for gold increases.
However, its price is going back down due an economic growth and the Tax
Cuts and Jobs Act that will increase the value of the US dollar and of the
stock market.


Gold differs from other commodities. Prof.
Antal Fekete believes that, even if it is a natural resource, it should be
analysed as a hard currency. This is because it doesn’t get consumed over the
years and maintain its value. In fact, even if oil and gold have multiple factors that
will affect their price differently.



If until recently gold was the most common asset used to
hedge against
financial uncertainty, bitcoins due to the incredible increase in value, are
becoming more popular increasing the attention of small investors.

The Market Realist declared that during the last month, online
researches of investing in bitcoins were higher compare to the one investing in

However, history says that when everyone is investing in a particular
asset and a bubble is created, the price is very likely to decrease sharply.



Additionally, Bitcoins
have been created in 2009 and as it is a relatively new asset, there are still
many doubts especially for its main characteristic of digital currency easily
converted into any other currency but not handled by
banks or governments. the market is
still uncertain about the future movements and the indicators. Not fully regulated



Howevere, gold is a tangible asset that can be converted
into any currency but it is less volatile then bitcoins and it doesn’t hold any
counterparty risk.


Gold as an asset is considered as a global store of value
and can be converted into any currency.

This trend suggests that bitcoin could be considered on
the same level as gold or cash.

While bitcoin is currently very volatile, gold is
considerably less volatile and thus holds its investment appeal for investors
looking for less risk in their portfolios.


Warren Buffett doesn’t support gold investment as he believes that it is
more convenient to invest in other assets that can give you earnings. But regarding
bitcoins, in 2014 gave some strong declaration against investing inviting the
investors to “stay away”.

Also, James Dimon, chief executive of JP
Morgan, recently declared that bitcoins are a fraud and that will fire any
trader that will invest in the digital currency.