Gold a Good Investment
That is the key question should I start my own Gold savings Plan?
Historically, gold has played a major role in the economies of many nations. Although it is no longer a primary form of currency, gold is still a solid, long-term investment and may be a valuable portfolio addition, particularly in a bear market.
Is Gold a Good Investment?
Gold was considered a universal currency for hundreds of years. Due to its recognized value worldwide, a gold standard was used as far back as the Byzantine Empire over 1,500 years ago. Until recently, in fact, gold was used as the world reserve currency.
In 1944, upon the signing of the Bretton Woods Agreement, the dollar replaced gold as the world reserve currency. But even after this agreement, gold continued to be used to back up various countries’ domestic currencies. However, in 1971, Richard Nixon removed the gold standard in the U.S. and other countries soon followed.
Advantages of Gold as an Investment
Although it is no longer a primary form of currency in the developed world, gold remains a popular investment for a number of reasons.
- Liquidity. Gold can be easily converted into cash anywhere in the world. Aside from actual cash, the liquidity and universality of gold is unparalleled.
- Holds its value. Gold tends to maintain its value over time. Economists argue that even the price of gold is not indicative of its value. That is, even if the price decreases, the underlying value of gold does not change much. This is largely because there is a fixed quantity of gold due to the fact that it is a commodity, whereas the U.S. dollar, which is a form of fiat currency, holds no inherent value.
- Hedge against inflation. Gold rises in value when inflation takes hold. Since gold is priced in U.S. dollars, any deterioration in the dollar will logically lead to a higher price of gold. As a result, during inflationary times, gold offers a much more stable investment than cash.
- Diversification. Adding different securities to your portfolio is an essential way to diversify and lower the overall risk of your investments. Moreover, because gold often moves inversely to the stock market and currency values, it provides an especially effective way to diversify.
- Universally desired investment. Gold is still a universal commodity. Although countries sell their currency futures, treasuries, and other securities around the world, unlike gold, they are subject to political chaos.
- Gold is used as an input in products. Since gold is used in the production of various products including jewelry and electronics, there is a reliable demand that further stabilizes the price of gold. Moreover, in times of increased demand, these markets can force the price of gold higher.
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