As the COVID-19 pandemic barreled its way through the global economy, investors turned toward so-called “safe haven” investments. These assets provided hopes of protecting wealth and hedging against the losses on traditional investments. Tangible investments, specifically, can help give investors a certain peace of mind as they are backed with the real value of the asset. While many investors turned toward gold as COVID-19 cast a cloud of uncertainty over the financial markets, others sought out a better alternative.
How Financial Markets Impact Gold Performance
In reality, gold may not provide the kind of comfort that investors are craving during market volatility. Sure, the value of gold can and has increased during times of economic uncertainty.
But that still means gold is tied to stock market performance.
Why would investors want to turn from one form of uncertainty to another during economic downturns?
COVD-19 and Gold Performance
Consider what the COVID-19 outbreak has done to the price and performance of gold. A fear-based reaction surrounding a potential second boom in COVID-19 cases around the world caused investors to flood the gold market.
Referring to the gold markets as “flooded” is no joke – gold is being traded at a historically high rate right now. Naturally, the price per ounce has reflected investor behaviour and resulted in a record-breaking performance. The price per ounce hit an all-time high just days ago as it reached over £1,538.
This proves that gold is not much different than any other type of investment during a market downturn. Sure, it may have an inverse correlation to market performance and increase in price as other types of investments lose value. However, when the market recoups and other investments turn a favourable corner, the price of gold is likely to sort itself back out. If an investor purchases gold now while the price is booming, the investment may lose value when it comes time to monetise the investment.
The result for investors? An asset with performance based on the global economy.
What’s the Best Alternative to Gold?
If you’re looking for an asset that isn’t tied to stock market performance, whether good or bad, you do have an option that is still largely overlooked. Whisky casks are a lucrative opportunity that allows investors to profit simply from time passing. What are the best benefits to whisky cask investment?
Natural Maturation Process
Whisky left in its cask continues to mature as it draws out the subtle flavours of the wood and mellows in the process. Maturation helps create the perfectly aged spirit that connoisseurs crave and sells for record prices in auction. However, once the cask is bottled, the spirit won’t age any further. Investors that purchase and hold whisky casks to mature the spirit further stand to make a great profit when they later monetise the investment.
Returns Based on Age – Not Market Performance
Casks tend to rise steadily in value over time whereas other tangible investments, like gold, can spike and plummet because of factors outside an investor’s control. Because whisky cask investment capitalises on the maturation of the cask, returns aren’t tied to the stock market. Instead, whisky cask returns correlate to the age of the cask and how long it has been left to age. Therefore, investors benefit from holding whisky casks as an asset that effectively safeguards wealth while still providing strong historic returns.
Casks Over Bottles?
Bottles can turn a considerable profit if an investor is willing to put the effort into researching whisky industry trends and auction prices. Where bottles can inhibit an investor’s portfolio is when it’s time to sell the investment. Investors can bottle or sell casks in a number of ways. Each strategy may profit the investor as they’ve already matured the cask to naturally grow its value. However, the price of a bottle of whisky can fluctuate based on trends within the whisky industry.
Plus, selling a bottle for a profit depends highly on the demand for that particular expression. While it could certainly increase in value over time, it’s also possible that the going price stays stagnant. That’s why many bottle collectors make sure their collection is filled with spirits that they personally enjoy. It’s the perfect backup plan if their best option is to sip the whisky rather than sell it.
Whisky: The New (Liquid) Gold
Gold performance is at an all-time high right now but investors can’t avoid volatility by jumping on the bandwagon. Instead, they may still fall prey to the whims of the stock market. As uncertainty grows among investors, gold prices spike. However, the opposite may also be true. As the faith in the stock market is restored, gold prices may fall. If so, investors may not receive the returns they had hoped for.
Whisky cask investment allows investors to diversify their portfolio and incorporate a new, liquid kind of gold. By utilising the passage of time and nature’s maturation process, investors not only become independent from market swings but also stand to generate some considerable profits.