Millions of investors are trying to behave sensibly and prudently with their investments. They know about the wide varieties of stocks and bonds available on the market. Investors want approaches that will help them make a considerable amount of money over a period of years. But they also want to find as many ways to protect their wealth as possible. Some investment portfolios include money that has been earned over a lifetime. Therefore, protection is essential to any investor’s view of their funds and strategy. One of the most common sources for protection in a portfolio is gold. Buying gold is a way to use an ancient source of wealth to protect a person’s funds for the present day.
Gold as a Precious Metal
Gold has been a precious metal for thousands of years. It has a number of qualities that help give it value as a precious metal. Gold is ductile and malleable. It can be melted relatively easily and poured into molds for new shapes. Gold can be drawn out into a wire for earrings or other pieces of jewelry. This metal has an enduring luster and the ability to be mixed with other minerals to form sturdier pieces of jewelry. Gold’s role as a signifier of luxury and wealth works along with its precious status. All of the gold that will ever be in the planet within the next several million years has already been made. It is scarce and only located in a small number of mines around the planet.
This status has been true in most localities at most times. There were a number of countries that became great because they just so happened to be located near vast quantities of gold. In Africa, gold was traded for salt to help provide nutrition, preserve food, and protect people from dehydration. Many societies in North and South America prospered partially because they were located near massive gold deposits that they could take advantage of.
Gold as Currency
Gold’s status as a mined material gives it a low supply that stays the same over time. It is also always in demand for one reason or another. Therefore, it has become a standard for currency for thousands of years. Gold would be used throughout these times for larger transactions and silver for less significant ones. Kings and queens would manipulate their currencies by changing the percentage of gold that was in each coin. Gold was so important that finding a new source of it could fundamentally alter the course of human history. In Europe in the 16th century, gold from Spain helped to turn that nation into the world’s most powerful. It also eventually led to inflation and a myriad group of problems for the continent’s people. Too much gold meant that gold prices over time constantly rose.
Gold’s status and nature helped make it the primary standard for currency in the United States. In the 19th century, the country started to develop a sophisticated gold standard. The gold standard was a concept whereby a paper currency was backed up by gold. A person could theoretically go to the government and exchange dollars and cents for a correlating value of gold. As a result, the government could instill trust in their currency. Throughout this period, the question of the value of gold shaped many political debates. For instance, there was a movement to introduce currency based on silver in the 1890s. Silver-backed currency would lead to inflation that would help farmers pay their debts and not have to worry about the robber barons who had captured much of the country’s gold supply. There was also a certain level of economic prosperity that came simply from finding a gold supply. The economic depression of the 1890s started to ebb once gold was discovered in Alaska.
The Recent Value of Gold
This history all applies to the current debate over the value of gold and the importance of gold in portfolios. Gold currently matches many of its historical trends. It is a precious metal that has a wide variety of uses in today’s society. It is also no longer used as a part of the currency. In the 1970s, the United States moved away from pegging the value of the dollar to the value of gold. The currency was allowed to “float” and is now based solely on the amount that people will pay for it and trust the government that backs it up. People can no longer exchange their currency for gold in practically any country.
Such a change presents an opportunity to investors for owning gold. Anyone who owns gold is benefiting in many different ways from the purchase. They can treat gold as a commodity like other commodities. Gold prices over time may go up if a new deposit is found or a new approach to mining is patented. New applications are sometimes discovered for gold and these innovations can drive the price up.
But most importantly, gold is viewed as a hedge against inflation and different global events that could harm the price of currencies. It is this exact reason why I urge everyone to at least think about studying gold ira custodians ASAP so that they can move funds into a gold-backed IRA account that serves as a retirement vehicle.
Gold has a level of value that many people believe fiat currencies like the dollar do not have. By buying gold, a person is protecting a certain percentage of their funds from potentially harmful inflation. Hyperinflation is a force that has brought down numerous countries over the past century or so. Protecting against this massive potential risk is an essential part of hedging and investing. People wondering why is gold a good investment should see it as a simple way to invest in such an inflation hedge.
Anyone considering purchasing gold for a portfolio needs to perform extensive research into their investing goals and why is gold a good investment for them. They must determine whether such an investment will work for them and what they need to do in order to optimize their portfolio against inflation. Finally, a potential gold investor needs to look into strategies and ways to buy gold. There are many approaches that vary in their strength and sophistication. Having the right approach could mean success or failure for an attempt to take advantage of such an influential marker of wealth in human history.
Publicly Traded Companies in the Gold Industry