Gold is historically one of the most common investment. Gold has thecharacteristic to hold it is value in the long term and today, it is still oneof the asset included in the portfolio.
Gold provides value by providing a good diversification. This is due tothe fact that its price has a negative correlation with the stocks and otherfinancial assets. As it isuncorrelated to the market, investors will be more attracted to goldinvestments during a financial and political uncertainty. Since 2007, the priceof gold constantly increased 2011 from 631$ ounces to $1735 by the end of 2011.
Recent newsalso led to an increase in the gold price. Starting from Brexit referendum andas consequence the cut in interest rates from the Bank of England that lead theprice to increase to $1364 by the end of the summer of2016. Source: etf.com “Gold is like a canary in the coal mine. It signalsproblems with respect to currency markets.
” Alan GreenspanIn the days before the USA election the price of goldwas also expected to increase further however it sharply decreased just after electionof Donald Trump. This is due to the declaration by the Fed to increase theinterest rates.From the beginning of 2017 the scenario changes, goldreflects the worldwide political instability and the demand for gold increases.However, its price is going back down due an economic growth and the TaxCuts and Jobs Act that will increase the value of the US dollar and of thestock market. Gold differs from other commodities.
Prof.Antal Fekete believes that, even if it is a natural resource, it should beanalysed as a hard currency. This is because it doesn’t get consumed over theyears and maintain its value.
In fact, even if oil and gold have multiple factors thatwill affect their price differently. If until recently gold was the most common asset used tohedge againstfinancial uncertainty, bitcoins due to the incredible increase in value, arebecoming more popular increasing the attention of small investors. The Market Realist declared that during the last month, onlineresearches of investing in bitcoins were higher compare to the one investing ingold. However, history says that when everyone is investing in a particularasset and a bubble is created, the price is very likely to decrease sharply. Additionally, Bitcoinshave been created in 2009 and as it is a relatively new asset, there are stillmany doubts especially for its main characteristic of digital currency easilyconverted into any other currency but not handled bybanks or governments. the market isstill uncertain about the future movements and the indicators. Not fully regulated Howevere, gold is a tangible asset that can be convertedinto any currency but it is less volatile then bitcoins and it doesn’t hold anycounterparty risk. Gold as an asset is considered as a global store of valueand can be converted into any currency.
This trend suggests that bitcoin could be considered onthe same level as gold or cash.While bitcoin is currently very volatile, gold isconsiderably less volatile and thus holds its investment appeal for investorslooking for less risk in their portfolios. Warren Buffett doesn’t support gold investment as he believes that it ismore convenient to invest in other assets that can give you earnings. But regardingbitcoins, in 2014 gave some strong declaration against investing inviting theinvestors to “stay away”.Also, James Dimon, chief executive of JPMorgan, recently declared that bitcoins are a fraud and that will fire anytrader that will invest in the digital currency.