Investing in gold – do you need the Midas touch?

The price of gold has been rising in recent weeks, nearing and at times exceeding $1,750 an ounce, as many countries struggle to control the spread of Covid-19 – and investors want to hold something they feel they can trust.

In April, the gold price reached a seven-year high as investors flocked to the shiny metal that has long been seen as a store of value.

Gold typically acts as a ‘safe haven’ asset during times of crisis because it tends not to move the same way as equities and bonds. Essentially, as it is produced in very limited quantities, it boasts a residual value that other assets and securities cannot, and therefore investors holding gold feel confident that even in the worst of times, their investment will still be worth something. 

This sentiment has been evident through much of 2020. While equity markets have been hit with bouts of volatility as the pandemic began to dominate investment decision making, the price of gold initially maintained its value and, more recently, has rallied.

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It seems that many investors are moving money into gold rather than cash while they wait for opportunities in equity and bond markets to emerge as and when the global economy gets back on its feet. 

But while there is a clear demand for gold at the moment, the asset is not just something investors should turn to during periods of economic turmoil. There are other factors that drive its market price — such as central bank buying and jewellery demand in India and China – meaning gold can be a useful diversifier in an investment portfolio at all times.

There are also numerous ways for investors to get exposure to gold and other precious metals such as silver, palladium and platinum. Note that silver, too, has been notching up price rises in recent weeks, creeping up to around $16 an ounce.

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Alongside investing in the actual shiny stuff, there are plenty of other ways to benefit from the demand for gold. For example if you think the opportunity lies in gold mining then you can invest in Canada-based Barrick Gold, which mines gold and copper and has operations globally, and various other mining-focused stocks and ETFs. 

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So, while much of the value of gold comes from its relative short supply, there is no shortage of opportunities to invest and benefit from its appeal. 

With eToro, you don’t have to be King Midas, to have the Midas touch.


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