Is investing in gold a good idea right now? What are the reasons that those who choose gold as a retirement investment asset cite for their decision to invest in this shiny metal? Do those reasons hold the water, or are they fabricated to woo you into spending money that you’ll never recover? Well, if you’ve been curious about gold investments, and are here because you need some answers, then you are in the right place. Read on to find out more:
Gold has had a good reputation in all corners of the world due to its value, and its rich history which is part of many different cultures for several thousands of years. It is known that, for instance, coins containing gold were being used as early as 650 B.C., and the very first pure gold coins were used 100 years later, during King Croesus of Lydia’s reign.
Throughout the years, people have continued to purchase and hold gold for different reasons. Societies, as well as economies, have placed value on gold, and this has to a great extent, helped to perpetuate its worth. It has become the precious metal that nations, financial institutions, and individual investors, fall back on when other currencies are not doing well, meaning that its value is verified, more so during tough economic times.
As you gear up to make the next big decision about whether to invest in gold right now, let me present to you several characteristics that it has held consistently over the years, that are sufficient to help you to take the next step.
Gold has a history of holding its value
Unlike other paper currencies and other assets, this precious metal has managed to maintain its value for several millenniums. People have for a long time viewed gold as the way to either preserve or pass on their wealth to future generations. For many years, the unique properties of gold have been valued. Those properties include:
- Doesn’t corrode
- Can be melted over common flames
- It is easy to work with (for stamping reasons when making coins).
- Unique and beautiful color
- Can absorb light due to the heaviness of its atoms and the speed of its electrons.
Even as we head into the next century, these properties will remain unchanged, and so will the value of gold.
The decline in value of the U.S. Dollar
As much as gold is one of the most powerful reserve currencies we have today when its value falls in comparison to other currencies like it did on two occasions in 1998 and 2008, investors tend to look for security in gold. This action raises the prices of gold in the market.
The price of one ounce of gold rose by about 3 times, in the period lasting between 1998 and 2008, and went on to hit the $2000 per ounce mark in 2012. The decline in value of the U.S. Dollar was as a result of:
- The country’s very large budget
- Significant trade deficits
- The sudden and large increase in money supply
A hedge against inflation
Gold has been for many years used a hedge against inflation. Historically speaking, the prices of gold tend to rise every time there is an increase in the cost of living. In the last half-century, investors have seen the prices of gold rise as the prices of stocks plunge during the years of high inflation. When paper currencies lose their purchasing power, then the price of gold, which is priced in those currency units, rises along with other commodities. In addition to that, gold is perceived as the store of value, hence more people are encouraged to purchase gold whenever the local currency is declining in value, which is also something that drives the price of this precious metal higher.
Protection from deflation
Deflation is essentially the opposite of inflation, in that the prices of commodities decrease significantly as business activity slows, and as the economy becomes burdened by massive debt. This has not occurred on a global scale since the Great Depression in the 1930s. A small degree of this force of the market was felt in some parts of the world, right after the 2008 financial crisis. During the 1930s Depression, the relative purchasing power of gold went up, as the other prices dropped sharply. This resulted from the fact that people chose to hoard cash, and gold and gold coins happened to be suitable options at that time.
Gold has not only been used to seen to retain its value in times of financial instability but also during times in which there is global political tension. People tend to flee to gold for safety during such times, as local and international currencies experience a significant drop in value. Whenever confidence in the government is low, the prices of gold tend to rise. The last two decades have had many events that have led to many people questioning the government’s actions, and this is this something that we can still expect to see more of in the future.
The increase in demand for gold
In previous years, we have seen an increase in the demand for gold in emerging market economies. For most such countries, gold is a part of their culture. In China, for instance, gold bars are seen as a form of savings. In the last few years, we have seen an increase in the demand for gold in China. The same has been happening in India which happens to be the second-largest consumer of gold in the entire world. The wedding season in October is one in which a large amount of gold is purchased for use in jewelry.
The demand for gold has also been significantly higher amongst investors, owing to their realization that it is a necessity in their investment portfolios.
With the reasons I have presented above, I believe you can already tell whether or not you can give this asset a chance to do what it has done for other investors so far. I don’t know what your thoughts are about it, so far, if you decide that you’d want to invest in gold right now, then you should spare a few minutes to read the reviews below:
That will be all for this article, “is investing in gold a good idea right now?”. I hope you found it informative, and that you will make a more informed decision on whether to invest in gold right away. Let me know what your thoughts are in the comments section below. Also, let me know if you have any questions with regards to how you can get started with gold investments.
I wish you well,
Eric, Investor and Team Member at Gold Retired!