Brexit certainly dealt the global markets a memorable shock. Soon following the historic vote, the pound fell to new lows not seen since the 80s. The Monday after Brexit, Dow Jones had fallen by more than 500 points. And that was even before the opening bell rang. Even though the chaos soon following Brexit has settled down somewhat now, investors and financiers are still uncertain about the future of the pound market.
Though major investors had safeguards in place to protect wealth following the Brexit crisis, the vote mainly affected regular and small-time investors. People saving for retirement on cash-value stocks were hit quite hard. However, there were some who did manage to contain the cash value losses. Why? Gold.
Gold is the Best Asset to Have During Financial Crises
Why do so many seasoned investors and traders go investing in gold bars and coins even when the price indexes are not doing so well? Historically speaking, gold prices have been highly volatile. Even if gold price indexes and ETCs are doing well right now, there’s no telling how the markets will be doing a year or even six months from now.
So why has gold historically been a favorite among investors? Gold is valued inversely against currency. If a certain currency falls because of an event like Brexit or the 2008 housing market crash, the value of gold naturally goes up. This fact is quite clear if you look at post-crash gold values. In the months soon following the global financial crisis, gold prices reached new heights. Similar price hikes, though not as high, were seen following Brexit.
Gold is One of the Best Assets to Diversify an Investment Portfolio with
In the immediate weeks following Brexit, gold was 4% and 6% more valuable than the U.S. dollar and the Euro, respectively. Gold ETC prices rose splendidly as well. Short-term traders made more millions trading gold stocks in the days following Brexit than they did during an average month in 2015.
This “Brexit gold rush” is not limited to experienced investors either. Ordinary Britons who have been saving in the long term, and for life events such as retirement, bought gold assets to protect wealth. Financiers estimate that British residents now have the most gold assets in the world, after the 11 wealthiest ETCs.
If you have gold stocks, you can easily trade them for a lucrative amount when the demand rises during times of economic uncertainly. Like some savvy Brits, having gold can protect wealth during times of financial crises. That’s the prime reason why everyone, especially those affected by Brexit, should have gold assets in their portfolios.
Long-Term Gold Investments Can Yield Lucrative Benefits
Gold is not only good for short-term trading following events like Brexit. Long-term gold investments, those that expect returns in only three to five years, can be quite lucrative as well.
For example, imagine that you have been saving for retirement with cash assets. If the cash value falls suddenly, as it did with Brexit, you will lose everything. But, if you have an asset like gold, you can easily hedge your losses against gold prices. Also, if you already have gold in your portfolio, you might be able to sell some assets and double your wealth for the long term.