Invest in Gold - Why Should You Invest in Gold?
There are number of reasons why would anyone invest in gold; could be a hedge against inflation or US dollar, value keeper or investment, save haven or portfolio diversification.
There are number of reasons why would anyone invest in gold; could be a hedge against inflation or US dollar, value keeper or investment, save haven or portfolio diversification. The point is that every investor should invest part of portfolio in gold.
The Many Uses of Gold
Gold has been historically used as a medium of exchange or money, because of its characteristics; gold is durable, portable, easily divisible, rare, useful and desirable. Today, gold is used in jewelry, as money equivalent, in industry, in dentistry, in medicine, in aerospace, in making awards, glassmaking and gold leafs.
Identifiable Gold Demand
Primary use of gold is for jewelry...
Source: World Gold Council
The primary use of newly mined or recycled gold today is in the manufacture of jewelry, which is because of its special properties that makes it an attractive metal: high luster, desirable color and others. Another extremely important factor that demands the use of gold as a jewelry metal is tradition. Important objects are expected to be made from gold.
Money, Money, Money
Today, gold is also used as money equivalent in a form of coinage, bullion or other form. Back in the history, in the times of "gold standard", every paper dollar in circulation had to be backed by gold. Today this is not the case anymore, but gold is still used as a financial backing for currency, most usually in a form of gold bars, known as "gold bullion" or gold coins. Today many governments, individuals and institutions hold investments in gold as currency hedge.
The most important industrial use of gold is in the manufacture of electronics, because it is highly efficient conductor that can carry tiny currents and remain free of corrosion, which makes electronic components made of gold highly reliable. Gold is used in connectors, switch and relay contacts, soldered joints, connecting wires and connection strips. Almost every electronic device uses at least small amount of gold: television sets, computers, cell phones, calculators, personal digital assistants, global positioning system units and other small electronic devices.
Gold is used in dentistry because of its superior performance and aesthetic appeal, although this was more often the case in the past then nowadays, when substitute materials are replacing it. Gold alloys are used for fillings, crowns, bridges and orthodontic appliances. Gold is used in dentistry because it is chemically inert, nonallergenic and easy for the dentist to work.
Gold is also used in medicine as a drug to treat a small number of medical conditions, NASA is using it in aerospace in building a hi-tech voyage vehicles, gold is further used in making awards (medals and trophies) and symbols of status (king's crown), it is used in glassmaking, it is used as gold leafs on the external and internal surfaces of buildings.
Why Should You Invest in Gold?
Gold is a monetary metal whose price is determined by inflation, by fluctuations in the dollar and U.S. stocks, by currency-related crises, interest rate volatility and international tensions, and by increases or decreases in the prices of other commodities. The price of gold reacts to supply and demand changes and can be influenced by consumer spending and overall levels of affluence.
Gold is different from other precious metals such as platinum, palladium and silver because the demand for these precious metals arises principally from their industrial applications. Gold's value does not arise from its usefulness in industrial or consumable applications. It arises from its use and worldwide acceptance as a store of value. If you invest in gold, you invest in money.
Hedge Against Inflation
As inflation goes up, the price of gold goes up along with it.
Hedge Against A Declining Dollar
Gold is bought and sold in U.S. dollars, so any decline in the value of the dollar causes the price of gold to rise.
Gold has often been called the "crisis commodity" because it tends to outperform other investments during periods of world tensions.
Demand for gold is outpacing supply across the board for years now and it doesnt seem that would change soon.
One major reason investors look to gold as an asset class is because it will always maintain an intrinsic value. Gold will not get lost in an accounting scandal or a market collapse.
Gold is the ideal diversifier for a stock portfolio, simply because it is among the most negatively correlated assets to stocks.
Written by: Goran Dolenc
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