Gold is a gleaming and metallic, and it melts readily into bars, coins, and ornaments. It does not corrode, rust, or degrade. Gold is well, platinum. But why is gold so important as a worldwide store of wealth and medium of trade, both in our thoughts and in actual fact? Why is silver consigned to a distant second position, and what about poor old copper, which shares many of gold’s physical properties? Join us as we strive to find answers to these and other questions.
- In the next articles, we will examine gold’s function in our economy, attempting to determine why it is valued and what purpose gold may play now in investor portfolios.
- According to some, gold was never more popular as an alternative investment, capable of weathering financial crises and hedging against the inflationary pressures of fiat money.
- We’ll go through the dangers and rewards of having gold as an investment, how to attempt to make quick gains day trading it in the commodities market, what impacts its price, and how to possess gold in your investment account.
Investing in Gold
Before we jump on the bullion bandwagon, allow us first put a damper on the excitement and analyze some of the explanations why investment in gold does have some basic flaws.
The major issue with gold is that, unlike other commodities such as oil or wheat, it is not used or used up. When gold is mined, it remains in the world. A barrel of oil, on the other hand, is converted into gas and other products that are used in the gas tank of your automobile or the jet engines of airplanes. Grains are found in the food that humans and our animals consume. Gold, on the other hand, is made into jewelry, utilized in art, and preserved in ingots that are locked away in vaults, and put to use in a number of other ways Regardless matter where gold ends up, its chemical makeup is such that the valuable metal cannot be depleted – it is eternal.
As a result, the supply/demand argument that may be made for commodities like as oil and cereals, etc., does not hold true for gold. In other words, even if demand for the metal declines, supply will increase over time.
The Supply Issue is Overcome by History
Gold, more than any other commodity, has captivated human communities since the dawn of recorded history. Over money and mercantilism, empires and kingdoms were established and destroyed. Gold became widely acknowledged as a good form of payment as cultures advanced.
In summary, gold has always had more power than any other commodity on the earth, and that power has never truly vanished. Until the 1970s, the United States’ monetary system was based on a gold standard. (1) Proponents of this standard believe that because the quantity of credit issued is connected to a physical supply of gold, such a monetary system efficiently regulates credit expansion and imposes lending standards discipline. It’s difficult to disagree with That line of thought came after over three decades of credit expansion in the United States, which resulted in the financial catastrophe in the fall of 2008.
From a basic standpoint, gold is often seen as a good inflation hedge. Gold is an excellent store of value in the face of a weakening currency.