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Gold has always been a major investment, whether the economy is stable or not; but it is when it is volatile that many investors turn to gold over stocks or bonds. This seems to suggest that during times where it can be impossible to predict what the economy will do, gold is a safe choice of investment.

There are several factors which contribute to the image of gold as a ‘safer’ investment than stocks. This is largely due to the fact that it has proven itself in the past to hold its value throughout large-scale economic crises. Even at the time of the Great Depression and the Second World War, gold continued to consistently hold value while stocks and bonds plummeted. This proven consistency is a huge factor in the decision of many investors to choose gold to avoid large losses.

What is also significant is that gold is a commodity, not just an asset to invest in. Many rapidly expanding markets, such as electronics – which utilises gold extensively – create much of a demand for gold that keeps it value high. Also, the luxury market, whose customers are less likely to be affected by a downturn in the economy, also have a high demand for gold in areas such as watches and jewellery; with this demand, gold is a good investment that will not suddenly lose value.

Gold has been a key part in establishing currencies all round the world over thousands of years. Due to this, gold is effective as currency worldwide and being internationally recognised, does not depreciate and therefore lose money for investors. The dollar and pound’s values can change considerably depending on the economy and many other variables, whereas gold is not linked to a specific economy or government and its variations are less noticeable.

One major reason that investors choose gold is that it is a hedge for inflation. This means that while stocks or bonds are declining, assets such as gold can in fact increase in value and therefore pose less of a risk to an investor wishing to make a safe choice.

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