Why You Should Own Gold

Introduction

Since the start of time, gold has always been known to be an element of extremely high value. Women back then begged for gold accessories, and fast forward to a thousand years later, gold is still a highly prized possession. For many hundreds of years, investors have been choosing to own gold for many reasons, as the value of gold has always remained high. If you are thinking of earning some extra cash on the side, owning gold should be at the top of your list — and here’s why:

1. Value

As mentioned before, the value of gold has been very well maintained across many centuries, and it is predicted to still hold value for many more years to come. Though paper currency, coins, and other financial assets have been steadily losing investors, gold is still extremely highly sought after because of the sustained value in them. Gold is often used as an heirloom, as its value increases as it gets passed on to the next generation — and this is due to its favorable properties. Gold does not corrode and can be easily melted by fire, making it malleable and easy to use. Its elegant color also makes it very attractive, unique from other common elements that lack the shine and glimmer. This is due to its heavier atoms and faster electrons, which makes it light and easily absorbable, contributing to its stunning appearance.More so, due to its high value, there are a plethora of IRA companies that aid people in investing gold, with sites like mineweb offering reliable reviews for those who are considering this mode of investment.

2. The weakness of the US dollar

Though the U.S. dollar takes the position as one of the world’s most significant reserve currencies, its decline in value caused the rise in gold when it dipped between the period of 1998 and 2008. The sheer number of people who transitioned from the US dollar to gold caused the demand to spike, causing a significant jump in the value of gold prices. Its value peaked during that period and tripled in prices, reaching about a thousand dollars per ounce during the first quarter of 2008, and continued to double since then till 2012, skyrocketing to about $1900. The US dollar’s decline can be attributed to a host of reasons, including the US’ huge budget and trade deficits, as well as the sharp rise in the money supply. As such, expediting the weakness of the US dollar, gold seemed to be a more stable asset to invest in.

3. Inflation hedge

Known as an excellent inflation hedge, gold continues to be one of the top assets that individuals are flocking towards. This is because as the living expenses increase, the prices of gold will increase concurrently as well. Throughout the past five decades, investors have witnessed the incredibly high prices of gold, while stocks in the stock market plunged during the years where high inflation was recorded. This common trend is because, when fiat currency decreases in purchasing power when inflation happens, gold will be priced in those currency units and increase as everything else increases. Furthermore, gold is seen as an excellent source of stored value that people flock to when they predict that their local currency is declining in value.

4. Deflation protection

Deflation is known as a period of sustained decrease in prices, especially due to a slow down due to a large incur in debt in the economy resulting in declining business activities. One of the worst cases of deflation was the Great Depression in the 1930s, followed by the 2008 financial crisis that hit certain countries harder than others. During those periods, the purchasing power of gold increased while the prices of other assets dropped significantly. At that point in time, a majority of the people felt unsafe to have their money stored in the banks, resulting in huge sums of money withdrawn from the banks as individuals chose to hoard cash. The safest place to keep cash was in the form of gold and gold coins, resulting in the booming gold industry at that point in time. Therefore, this once again shows the usefulness of gold and the stability of its value even during financial crises.

5. Geopolitical uncertainty

Not only is gold good at storing value during periods of financial uncertainty, but it also proves to be a stable asset during geopolitical uncertainty, which is often known as “crisis commodity”. When world tension rises and individuals start worrying, they flock to relative safety like gold, resulting in its increase in prices as it outperforms other types of investments. For example, the crisis that occurred in the European Union witnessed the soaring of gold prices as there were major price movements, and this usually happens when the confidence in the local government is low during trying times.

6. Supply shortages

A majority of the supply of gold from the period of the 1990s till now stemmed from the sales of gold bullion from the vaults of global central vaults. As the supply of gold bullion by the global central banks decreased in financial activity in 2008, the surfacing of new gold from mines had also declined since 2000. During that period, there was an estimated reduction of gold-mining from 2573 metric tones in 2000 to 2444 metric tones in 2007. This reduction in supply resulted in an upward movement in the prices of gold, due to the low supply and rising demand. Hence, it can be predicted that the value of gold will still continue to maintain and even increase in the years to come, as it takes a prolonged period of 5 to 10 years for a new mine to start producing gold.

7. Rise in demand

In recent years, the increasing wealth of emerging market economies has resulted in a spike in demand for gold. Furthermore, gold is often associated with culture for certain countries like India. As a country that values gold as part of its heritage and one that uses gold for many purposes, India is known to be one of the top countries that consume gold in the world. As such, especially during the wedding season in October for the country, there will be a sharp increase in the demand for gold, causing a correlated increase in the prices as well. Moreover, China uses gold bars as a traditional form of saving, resulting in sharp increases in demand too.

Conclusion

All in all, gold proves to be an extremely durable asset in terms of its quality and value. The value and price of gold have shown to continue to increase even during financial and geopolitical uncertainty, suggesting that it is indeed an element worth investing in. The next time you think of embarking on a new investment, you should consider gold as it has proven its worth and is predicted to experience a constant rise in value.

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