Gold. It’s shiny, metallic, and melts easily into bars, coins, or jewelry. It doesn’t rust, corrode, or decay. Gold is… well, golden. But why is gold so valuable, both in our mind’s eye and in reality in terms of a global store of value and medium of exchange? Why is silver relegated to a distant second place, and what about poor old copper, which shares many of the same physical attributes as gold? Join us as we try to figure out the answers to these questions, and much more.https://cd7259a65c6972c8c1d5cc9f086c48f5.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
- In the articles that follow, we will take a look at gold’s place in our monetary economy and try to uncover just why it’s valuable and what role gold can play today in investor’s portfolios.
- In fact, by some accounts, gold has never been more fashionable as an alternative investment, able to weather financial crises and hedge against the inflationary pressures of fiat currency.
- We will discuss the risks and opportunities of owning gold as an investment, how to try and make quick profits day trading it in the commodities market, what influences its price, and how to go about owning gold in your brokerage account.
Gold as an Investment
Before jumping on the gold bandwagon, let us first put a damper on the enthusiasm around gold and at the outset examine some reasons why investing in gold has some fundamental issues.
The main problem with gold is that, unlike other commodities such as oil or wheat, it does not get used up or consumed. Once gold is mined, it stays in the world. A barrel of oil, on the other hand, is turned into gas and other products that are expended in your car’s gas tank or an airplane’s jet engines. Grains are consumed in the food we and our animals eat. Gold, on the other hand, is turned into jewelry, used in art, stored in ingots locked away in vaults, and put to a variety of other uses. Regardless of gold’s final destination, its chemical composition is such that the precious metal cannot be used up – it is
Because of this, the supply/demand argument that can be made for commodities like oil and grains, etc, doesn’t hold so well for gold. In other words, the supply will only go up over time, even if demand for the metal dries up.