As the holiday season draws near, the quest for the perfect gift intensifies.
While traditional presents undoubtedly have their allure, an emerging trend has seen an increasing number of individuals considering financial gifts like Gold as a pragmatic and thoughtful alternative.
As the spotlight turns to the practicality and significance of offering financial gifts, let’s take a look at some of the most popular ones and why Gold might be the best option in 2023.
Financial gifts stand out as a thoughtful, timeless, and genuinely valuable choice for holiday presents
A financial or investment gift involves giving someone an asset or contribution that can increase in value over time, like stocks, bonds, mutual funds, or a contribution to an investment or retirement account.
These gifts offer recipients the freedom to use the funds based on their individual needs or desires. Whether directed towards personal spending, saving, investing, or achieving specific financial objectives, financial gifts provide a level of flexibility that resonates with the recipient’s unique financial circumstances and preferences.
This practical and versatile nature not only empowers individuals to make personalized choices but also communicates a sincere expression of care for their financial well-being and future.
Depending on the financial gifts you decide to offer, your loved ones could profit from compound interest and watch their money grow over time.
Is Gold the best investment gift for 2023?
On December 4th, Gold prices reached their all-time high (ATH) at around $2,089 per ounce, and many analysts believe that the trend will continue in 2024.
Let’s discuss the reasons why Gold may keep reaching new record highs next year.
Daily Gold Chart – Source: ActivTrades’ online platform, ActivTrader
The first reason behind the recent rise of Gold prices is the expectation that the Fed is done with interest rate hikes and that it will even cut interest rates next year, as inflation is cooling down.
As traders bet on interest rate cuts, the American Dollar (USD) is weakening, which usually supports the price of commodities libeled in USD such as Gold, as the metal is cheaper for international buyers who usually take advantage of lower prices to buy.
It is also interesting to note that in times of lower interest rates, investors can turn to Gold (the precious metal and interest rates have a negative correlation).
The inverse relationship between gold and interest rates revolves around the concept of opportunity cost, which refers to the potential benefits an investor forgoes when choosing one investment over another.
In the case of gold, which doesn’t provide interest or dividends, the cost of holding it is the potential income that could be earned from interest-bearing assets like bonds. In times of interest rate cuts, the yield on bonds and other interest-bearing investments is decreasing.
In such an environment, the opportunity cost of holding gold decreases because the income sacrificed by not investing in interest-bearing assets is relatively small.
As a result, investors may find gold more attractive during periods of low-interest rates, as it doesn’t suffer from the reduced relative yield that affects income-generating investments.
The second factor supporting Gold prices is geopolitical tensions.
Gold often demonstrates strong performance in times of economic and geopolitical uncertainty, as investors seek assets that can preserve wealth and provide a safe haven for their capital, as the metal is considered less susceptible to the fluctuations and risks associated with traditional financial markets.
While the focus is currently on the Israel-Palestinian conflict, the war between Russia and Ukraine is far from over. Moreover, a certain number of key elections are happening in the world next year, which might add to the uncertainty depending on the results, such as in Indonesia, India, Mexico, Russia, Taiwan, the European Union, the United Kingdom, and the United States.
The third key factor supporting Gold prices is the increasing Gold purchases by central banks, particularly those of emerging countries that are not closely aligned with the United States.
Given that the U.S. dollar can be wielded as a tool for economic sanctions, as evident in cases involving Iran and Russia, nations anticipating a potential deterioration in their relationship with the United States may seek to diminish their dependence on the USD.
Investing in a reliable and secure asset like Gold, which is internationally recognized and immune to being seized or frozen, becomes an attractive option. This strategy helps these countries diversify their reserves and safeguard against the uncertainties associated with geopolitical tensions and economic sanctions.
According to the World Gold Council, “central bank demand is on course for another strong annual total […] after the second highest third quarter on record” since 2010.
The People’s Bank of China (PBoC) was the largest buyer last quarter, but Poland, Singapore, and Turkey were also large-scale buyers last quarter, followed by India, Uzbekistan, the Czech Republic, Singapore, Qatar, Russia, the Philippines, and the Kyrgyz Republic
What are the other popular financial, money-themed, and investment gifts?
- Giving cash
- Writing checks
- Offering prepaid debit cards
- Investing in their business idea
- Paying for an investment course
- Arranging a meeting with a financial advisor
- Buying books about personal finance and investing
- Setting up a custodial investment account for investors under 18
- Buying shares
- Buying fractional shares if the stock is too expensive or exceeds your budget
- Buying ETF
- Buying bonds
- Offering a Certificate of Deposit
- Buying cryptocurrencies
- Buying physical precious metals other than gold, like silver.
How to choose the perfect investment gift
Choosing the perfect investment gift involves thoughtful consideration of various factors to ensure it aligns with the recipient’s unique circumstances and goals.
Age is a crucial factor in determining the appropriate investment strategy.
Younger individuals, with a higher risk tolerance and longer investment horizon, may benefit from more aggressive investment options like stocks or growth-oriented assets. Conversely, older individuals might find a conservative approach, focusing on income-generating investments, suitable for capital preservation, such as bonds.
For children or teens just starting to engage with finances, options like piggy banks, financial games, or bank cards can be thoughtful choices.
The next thing to take into consideration is the recipient’s financial goals. Whether saving for a major life event, retirement, or short-term milestones, always tailor the investment gift to align with their objectives.
Another aspect is to assess the current financial situation to prevent redundancy in their portfolio. If they already have exposure to a specific asset class, consider diversification or exploring alternative investments. Additionally, factor in any outstanding debts or financial obligations.
Finally, keep an eye on the broader economic context, as different sectors perform differently under varying economic conditions. Assessing the current economic landscape and growth outlook to identify promising sectors or industries will guide you in the selection of investment gifts aligned with potential growth trends.
