Eight Reasons for Gold Investment

Unlike the various currencies and other assets of the modern world, gold already proved its worth throughout history. For thousands of years, the value of this precious metal has been intertwined within great cultures and civilizations the world has seen.

The ancient Egyptian civilization was the first to explore the properties of gold in 3,600 BC.  During the reign of King Croesus of Lydia (present day Turkey), the first pure gold coins were minted for trade. Around this time, the ancient Chinese also began circulating the Ying Yuan, or square gold coins.

Since then, gold’s prestigious status and high value continues to grow. If we believe history, gold’s apparent preciousness will remain unsurpassed and perhaps, even more so in the coming years. If this does not make gold among the very best investments, you might want to consider the following as good reasons for owning gold.

• At present, the US dollar is among the most important reserve currencies. In 1998 and 2008, US dollar fell against other currencies and people started to flock to the security of gold. This resulted in raised gold prices. Between 1998 and 2008, the price of gold nearly tripled at $1000 per ounce. Then, the price of gold nearly doubled from 2008 to 2012 at $1900 per ounce.
• During times of inflation (when the cost of living peaks and the purchasing power of money falls), gold proves to be an ideal investment. This is because the price of gold typically arises when the cost of living increases.
• While there’s a general reduction in prices in times of economic depression, the purchasing power of gold is known to soar. During the Great Depression of the 1930’s, for example, there was an increase in the purchasing power of gold while other prices plummeted.
• Gold is often referred to as a ‘crisis commodity’. In times of financial uncertainty due to geopolitical tension, gold retains its purchasing power. During times of high political tension,  gold outperforms other investments. Even more, gold tends to increase in value when confidence in governments runs low.
• Reduction in the supply of gold means an increase in the price of gold. This is another reason gold makes a good investment. Since 2000, the production of new gold from the mines had seen a constant decline in numbers. According to BullionVault.com, the yearly gold-mining output had fallen from 2,573 metric tons in 2000 to 2,444 metric tons in 2007. This means, high prices as gold production dwindles down.
• Emerging market economies tend to demand for more supply of gold. Gold is deeply rooted into the various cultures of many emerging market economies such as India. October usually sees the high global demand for gold because traditional Indian weddings are popularly celebrated at this time of the year.
• Gold is also known to be less volatile than other commodities. It is great in diversifying your portfolio. Diversification protects your portfolio against the fluctuation of assets that move in a similar direction. Most portfolios consist of traditional assets such as stocks and bonds. By combining gold among these assets, you reduce the overall risk and volatility of your portfolio.

Sharon Freeman is an Australian freelance writer who writes professionally about investment trends and information for companies like www.ausmint.com.

 

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Category: Gold