Advantages of Investing in Gold Compared to Bond Market Investing
When people think of safe investments the first thing that comes to mind are usually bonds. There is a good reason for this since bonds do tend to be one of the safest investment options available. That doesn't however mean that bonds are risk free, there are definitely risks involved in investing in bonds. Bonds also suffer from the fact that the returns on them are very low, especially at the present time with interest rates at all time lows. For investors looking for a safe place to put their money while still getting a reasonable rate of return gold makes an excellent alternative to bonds.
The biggest problem with investing in bonds is that the returns are very low. Bonds are supposed to represent the safe part of your investment portfolio so high returns aren't really expected but given current interest rates the returns are very low. Gold offers an opportunity to invest in a safe place while still getting reasonable rates of return, certainly better than those offered by bonds.
The other problem with bonds is that they really aren't as safe as many people believe they are. While there is little risk of the bond itself depreciating in value there is a large risk of the underlying currency losing value. This has happened recently to people who had their money invested in US dollar denominated bonds, particularly people who live outside of the United States. The bonds themselves retained their value but when you sell them the money you receive will be in American dollars. Since the value of the dollar has plummeted against other currencies most bond investors have actually lost money. This isn't an issue for gold, it is traded in multiple currencies so there is no currency risk.
Bonds also have the disadvantage of being confusing, in fact most people invested in bonds don't really understand them. Many people invest in bonds under the impression that it is a simple investment, they buy a bond that pays them a certain interest rate. The truth is actually much more complicated, there are many things that affect the price of bonds. Most bond investors are invested through a mutual fund which allows them to invest without really understanding the market but it also means paying a management fee on an investment that already has low returns. Gold on the other hand is a much simpler investment.
A portfolio should have a large percentage of it's value invested in low risk instruments to protect you when the market is weak. Bonds are certainly one option for doing this but in many cases they aren't a great option. Investing in gold provides a similar level of safety to that provided by bonds and has the added benefit of increasing in value at a much faster rate. Gold also protects you from the risk of changes in the value of currency. Any investment portfolio really should include gold.