Advantages of Investing in Gold

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Posted on 04 August 2011

Gold has been a useful commodity throughout the economic history of mankind. In the earlier civilizations gold used to be a currency itself. There used be to coins made of gold and silver. The gold remained in the market as a standard for trading purposes till the beginning of the 20th century. In the second half of the previous century gold was replaced by paper currencies the world over.

Of course, there were many reasons for it. The chief being the security, inconvenience issues in doing the transactions. Today, many people think gold as a jewelry only and consider it to be an unreliable form of currency. The facts speak in contrary though. We tell you a few reasons for that;

Stability in Trading Value

Although there have been some down turns but over the last few decades gold has overall seen a surge in its value. It has been used as a way of preserving wealth. Take the example of its equivalence to US dollar. In the early 70s, one ounce of gold equaled 35 $ which has now risen to 1000$. The value of dollar might have decreased due to various reasons chief of them being an increase in the amount of money available in the market.

An Economic Weapon

From the various stats of the central banks and IMF it is evident that almost one fifth of the reserves are in the form of gold. Had the gold not been a symbol of security the economists would have never preserved the wealth of the country in the form of the gold.It is also used against the inflation. The buying power of the gold owner is preserved or increases with the increase of inflation. Inflation can harm you in the long run when you are buying goods at an increased price or when your currency is devalued. So that you can’t buy the same things in equal number of currency units.

Lesser Production of Gold

Like any other mineral gold reserves have also started to deplete. This has resulted in lesser production of gold from the gold producing companies. On the other hand the human population is increasing all the time. This has automatically resulted in a supply demand gap which in turn increases the price of gold further.

Immune

Gold is immune from the geo political situations. Throughout the history of mankind there have been a variety of changes in political landscapes of the different countries, resulting in a collapse of their monetary system. But gold is not a property of only one nation. Its value has the same effect on all the currencies.

Diversification in Assets

Gold also provides you a choice with a diversification in your assets. Gold is not dependent on the values of stocks, securities or bonds. Stats show that over a period an increase in value of one commodity has shown a decrease in the value of other commodity. They are never interrelated.