Why People Invest In Gold
Investing in gold has had a natural attraction since it was discovered. There is some debate as to when gold was discovered. It can be assumed it was thousand of years ago. Since that time it has been collected, admired, and hoarded. The appeal of gold is undeniable in any culture, and gold is rare, making it more appealing. All the gold that has ever been produced would fit in a 60-foot cube.
In 1900 the United States fixed the value of the dollar against gold prices and instantly created a market for investing in gold. Gold is often used as a hedge against inflation. There are two kinds of people who invest in gold. Many in the numismatic industry invest in gold coins. The intricate designs of gold coins, foreign and domestic have attracted coin collectors for generations. The second type of investor is only interested in the weighted value of the gold. Is there a preferred way? No not really. Gold Coins generally will have a premium attached to their price. However, gold coins will always carry the price of their melt down value.
Investing in gold has proven over time to retain its value during time when the currency loses value. Starting in 2004 gold has steadily advanced in price. The globalization of the world economy reinforces its price as other countries lose faith in the American dollar. Smart investors often forecast economic conditions months and years in advance and secure positions in gold.
Using today’s economy as an example, the United States is in the midst of a deep recession. Some would argue that it is a full-blown depression, but most are timid about calling it that. The point is investing in gold offers measure of support for investment portfolios. The bottom line is a weak US dollar, produces a strong gold price. It has been proven time after time. The mood and sentiment of the investor plays a large part in the price of gold.
There will always be a demand for gold. There always has been. Since the supply of gold is controlled by essentially a few mining companies the price of gold is easily manipulated. If the price of gold gets too low, the mines are closed down and this establishes a floor on the price.
There is a down side in investing in gold. A return on your investment in gold is not guaranteed. Gold does not draw interest or dividends in and of itself. Again the larger countries and banks that own the majority of gold control the price.
For those wishing to invest in gold mining stocks gaining leverage on your investment in gold is easier. It I much easier to but 10000 shares of your favorite gold mining company than it would be to make a significant cash outlay in buying 10000 ounces of gold. However many investors like to take physical possession of the gold they purchase.
Gold provides a tangible asset to hold in uncertain economic environments. A falling dollar, a falling economy, or high unemployment can offer investors security. These are just some of the reason people invest in gold and these are not likely to change. They have not for thousands of years.