Why is gold an irreplaceable instrument?

08 Nov 2023

As the 2023 year is about to end, people need to find out where the economy may be headed in 2024. Although inflation slowed down, it unexpectedly quickened in July and August, hitting consumers’ pockets.

No wonder that many people are looking for ways to protect their assets against a volatile economy and opt for gold trading. Going to reconsider your investment plan? In most cases, gold could be a good investment. It can help you withstand the changing economic environment. This yellow metal offers stability, while investing in other assets, like crypto, is quite risky during times of uncertainty.

If you want to learn how to trade gold on MetaTrader5, continue reading.

Why is gold so valuable?

Gold is an asset with various qualities which make it a must-have for investors’ portfolios. Investors have many reasons to invest in gold. Here are some of them:

  • Throughout the ages, gold has kept the position of a highly coveted material;
  • Over millennia, gold has been used as a means of exchange;
  • Important economic role as gold can be used in many spheres;
  • Good investment opportunity for individuals;
  • Gold is noncorrosive and durable;
  • The visual beauty of metal;
  • Gold is a rare metal.

One must agree that gold has always had value in jewelry; it was a component of currency, and thus an investment. But in addition to these concrete values, we would add another characteristic of gold that is just as real as gold forex trading.

Why it makes sense to invest in gold in 2023

The benefits of adding gold to your investment portfolio:

  • Gold can hedge inflation. Gold generally preserves a purchasing power over the long haul, despite fluctuations in currencies;
  • You can diversify your portfolio with gold. During times of economic downturn, gold investing can be a good way to diversify a portfolio. It reduces your exposure to risky assets and minimizes the impact of other losses;
  • Liquidity is the key. If times are tough, you can cash in on gold assets and still stay afloat.

Trading gold vs trading forex

Gold is a store of value. Unlike currencies, it is not subject to the whims of governments and central banks. Its price isn’t influenced by either fiscal or monetary policy and will always be worth something.

Gold trading is considered a “safe haven”. When trends are risky, traders tend to buy haven assets. On the other side, traders strive to sell them when the risk appetite grows. They opt for currencies with a higher interest rate. This makes gold a dependable hedge against inflation and a valuable asset.

Cryptocurrency vs. gold

How to compare gold with other cryptocurrencies? There are so many cryptos, whose use is scarce. So, it would be better to choose Bitcoin as a well-known representative of the group. Let’s see the results of comparing gold with cryptocurrencies, namely with Bitcoin.

Historical aspect

The position of gold as a traditional store of value is still strong. It has remained unchanged for centuries. Gold has a long history. Neither changing political or economic conditions, nor technological advances hurt GLD shares in the long haul.

In contrast, Bitcoin has been here since 2009. It is just supposed to be an independent alternative to fiat currencies. Today, Bitcoin has many characteristics similar to the gold standard:

  1. Independence from governments;
  2. Lower consumption;
  3. Deflationary behavior.

That is why it is often compared to gold and known as the successor to it. However, Bitcoin’s history is relatively short and it has not yet demonstrated its ability to withstand the test of time.

Liquidity of assets

Bitcoin is one of the most liquid assets in the world. It takes one click to send a few Bitcoins anywhere in the world which cannot be said about bars of gold.

Nevertheless, the situation is different in areas without Internet access or in case of power issues. Gold is always available which definitely can make a difference at times when power shortages and blackouts are becoming common. In this context, Bitcoin mining consumes more energy than some countries do.

In case of collapsing currency, gold might not have an immediate use, but it would eventually be used as payment for goods and services. Plus, in modern days, you can trade gold online at FXCI or other firms.

Security of transactions

Gold is a commodity that is available in different forms. Its availability is not affected by technology. The gold market is regulated and only registered traders can trade gold. You may say it acts as a constraint. Yes, it does! On the other hand, it increases the security of transactions and reduces the possibility of fraud in leaps and bounds.

What about Bitcoin? One of its biggest advantages is using the blockchain technology on which Bitcoin is built. This technology is a decentralized ledger for digital transactions. Actually, due to a high demand for Bitcoin, many transactions are carried out outside of the blockchain network. These transactions strive to bypass the limitations of the blockchain. At the same time, they put their security and verifiability at stake.

Field of application and volatility

Gold has a wide range of applications in many industries due to its physical properties. It guarantees sustained demand and, combined with its limited quantity as a mineral, keeps its price relatively stable in the long term. Thus, buying gold is always a good idea.

The usability of Bitcoin is quite problematic. Although the total number of Bitcoins is also limited, most likely it can be used as a means of payment by fans of new technologies or as an alternative to conventional currency. However, many people use it as an alternative investment asset due to its low correlation with other traditional assets, including gold.

The main disadvantage of Bitcoin is its very volatile price. It is appropriate for neither an investment nor a currency. For instance, when the price of Bitcoin rapidly rises, no one will use it as a currency. The owners expect further appreciation and aren’t keen on buying something with it. When its price falls, interest in Bitcoin also falls.

How to trade gold?

Going to add gold to your portfolio? There are various options available for investors. While some may want to purchase gold bars, coins, or jewelry, others may opt for the best way to buy gold such as gold exchange-traded funds (ETFs) and shares of gold mining companies.

The time has gone when it was difficult; when you had to buy and sell the metal itself. Modern options allow traders to take positions without ending up with a safe full of gold bars. ETFs made it easier. Today, trading gold is almost no different from trading forex.

In a spread-betting platform, it is simply a matter of buying or selling the commodity. For many investors, trading gold is quite simple because the mentioned asset is physical, unlike numbers in a bank account.

Final thoughts

Our point of view is that gold is the most logical choice for the means of exchange for goods and services. The metal is common enough to mint coins, but at the same time, it’s rare enough. Thus, not everyone can produce them.

Humans are physically and emotionally drawn to gold whether it’s about jewelry or gld stock market. It always provides a sustainable store of value.

We fall back on gold when other forms of currency don’t work. It means that gold will always have value in tough and good times.

Not sure if gold is the right option for your finances? Perhaps, you need help making a gold purchase? Feel free to talk with FXCI friendly community on Discord! Our team will gladly help you make the right decision that meets your individual financial goals.

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