Gold as a Safe Haven
The spot price of gold attained an all-time high on Monday, July 27, drawing the attention of investors worldwide. The precious metal is often employed as a hedge against inflation and market uncertainty, based on the theory that gold should retain its value when equity and bond prices fall, or when currency is devalued and nominal prices rise.
It’s worth noting that gold does not typically qualify as an investment in the context of finance because it generally does not have a probabilistic expectation of generating cash flows to an investor, unlike stocks, bonds, and real estate. Rather, the “value” of gold is dependent on supply and demand at any given point in time.
Given this consideration, investors should prudently weigh opportunity cost along with downside risk in the context of their objectives, risk tolerance, and time horizon when deciding whether to purchase gold.
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- Anthony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
