Why Do People Invest In Gold?

climbingWhy do people invest in gold?

The short answer to this is because of uncertainty. When prices of gas, oil, and other basic commodities rise, people get worried and run for cover. That cover is gold, which has been used for hundreds of years as hedge to inflation.

A more complicated answer to that would be because of political turmoil or liquidity issues. In 2013, Germany decided to repatriate some of its gold back from Paris and New York vaults due to, according to financial experts, liquidity issues. A lesson that all investors can learn from Germany’s decision to repatriate some of its gold is that the precious yellow metal should always be in close proximity to allow for easy liquidation. After all, there’s no point in owning gold if you can’t liquidate them immediately when you need to. Today, liquidating an ounce of gold costs around $1,300 USD. If you’re a gold investor, you may visit Bullion Vault to see today’s gold price and accurately calculate how much you’d get if you liquidate your assets.

Now, think about it this way: when prices inflate and the normal citizen can’t buy things conveniently anymore, the government tries to stimulate the economy by printing more fiat money. The problem is, when more fiat money is printed by a nation, its currency will get weaker. This is the primary reason why gold prices increase when currency declines. Inversely correlated, as investors would say.

Gold, however, is being shunned by financial markets and governments for one apparent reason: gold prices are highly volatile and cannot be controlled easily. Since they can’t control it easily, they tell people to stay away from it.

Many are saying that gold has limited uses in the present day. Bitcoin — an investment vehicle that isn’t backed by anything — is more popular than gold now. A Spanish official recently went as far as saying that gold is an unprofitable asset. Naysayers say gold shouldn’t even be a part of an investment portfolio since it’s difficult to sell in times of uncertainty. With a lot of people having these kinds of views on gold today, should investors really just forget about gold?

Don’t buy into the propaganda. As previously mentioned, many financial institutions and governments are trying to ward people off gold investments because they can’t control investors with gold. Why should they promote gold if they can’t manipulate its price shifts?

But the truth is, gold, when adjusted for inflation, would have to cost more than $2,200 per ounce to be on par with the last high in 1980 (see graph below). When the world returns to the gold standard — something Steve Forbes has claimed to be a huge possibility — gold prices could potentially climb even higher. Think of a world where gold costs more than $9,000 per ounce, as James Rickards had suggested — a figure around 8 times its current price.

Image courtesy of www.rapidtrends.com.

Image courtesy of www.rapidtrends.com.

Don’t be afraid to invest in gold. A 30% – 50% decline in its prices could mean many investors pull their investments from the market, but those who understand its nature and volatility shouldn’t be frightened. History shows that as long as you don’t pull out until the peak of a bullish market, you’ll more than likely prosper. And even if its prices go down by more than 50% of its original acquired price, it can still be traded in case of an economic catastrophe. In fact, it will be the only trade-able thing should stocks and currencies come to an end.

Save More Money in 2018

Coins 1523383 1920

Subscribe and join the worldwide 52-week money challenge! Get the tools you need right to your inbox.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Share this post:

Related Posts

2 Comments

  1. Oh gold bugs, you’re so fun!
    Gold definitely has a role in the investment world, however it is so, so driven by speculation that the price volatility and counter cyclical trending make it an iffy place to hold too much money.

  2. Michelle says:

    There is too much fluctuation for me to feel comfortable with that.

Leave a Comment

*

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
save money in college, college tips, college life

Save Money in College on Trips Back Home

College is expensive! Tuition, room and board, books, lab fees, and even trips back home! Even if you drive, this can be expensive.... more →