Is Gold A Good Investment?

gold coinsDuring the past couple of years, gold has become an increasingly good investment. Gold is a precious metal whose value is often an indicator of economic conditions. During hard times such as the current economic slowdown, people buy gold because precious metals typically retain their value during such times.

Prices of other commodities, such as food and consumer goods, may drop in a deflationary environment such as we are now experiencing, yet gold prices tend to remain at least stable and often advancing.

Why is gold a good investment?

Gold is a good investment, perhaps the best investment, for a combination of reasons:

Gold is fungible and universally valued
Gold is compact and portable
Gold holds or increases value during times of trouble
Gold is beautiful and useful
Gold is a proxy for all commodities
Gold is easy to invest in

Fungible and universally valued

Gold is quoted on every exchange and bourse in every city worldwide, because it is universally valued. Even in the smallest, most remote village, gold is instantly convertible into local currency. During the Viet Nam War, pilots routinely carried gold coins or wore gold chains and other jewelry as a form of “walking money” in case of a crash landing or bailout in enemy territory. Even under adverse conditions, gold can be exchanged easily for other value.

Gold is fungible; that is, one ounce of gold is exactly the same as any other ounce of gold, given the same specifications. This means that gold and other precious metals are nearly alone in being fungible investments: That is, most commodities or valuable items are either prone to differences in purity and composition, thus rendering comparison difficult, or else are such rare items that they make an illiquid market.

Gold is compact and portable

Gold can be stored and carried easily, and this quality is additive to gold’s other advantages for investment. Several thousand dollars in gold can be comfortably carried in one pocket! Gold has historically been used for everything from military payrolls to pirate ransom payoffs and every purpose in between. Although gold’s portability presents an overall advantage as an investment, it means that additional measures are usually needed to secure the investment in gold.

Gold retains or increases value during times of trouble

Gold’s best investment characteristic is that it retains its value during times of economic or political trouble. Often, as now, continuing economic troubles move gold prices upward for long periods of time. Gold has long been known as the ultimate investment haven during recessions and depressions.

Although current economic conditions have not yet reduced our civilization to the level of bartering meals for gold coins, it is a sobering possibility to consider, given the consensus prediction of a long, grinding, stagnant economic period to come. Gold is expected to continue to act as a solid foundation upon which to weather the ongoing financial storm.

Gold is beautiful and useful

Gold is the stuff of dreams… The sight of the yellow metal stirs passion and greed. Humans have used precious metals such as gold for millennia and gold jewelry is always popular. Many people wear their investments in the form of gold jewelry, with or without gemstones. Wearing gold helps raise a person’s image; gold makes people feel good about their appearance and it increases their confidence and prestige when interacting with others.

Beyond use in jewelry, gold is important for certain mission-critical electrical contacts and components across various industries. It is used in applications where resistance to oxidation makes it a perfect choice for electrical contacts otherwise subject to corrosion. And, gold has traditionally been used in dental fillings and sometimes in orthodontic or decorative applications on teeth.

Gold is a proxy for all commodities

Gold is a proxy for all commodities; that is, the price of gold tends to move in step with an overall basket of commodities ranging from agricultural products to petroleum products. Under certain business conditions or phases of the economic cycle, the prices of commodities in general rise for long periods of time. The current market cycle has seen an appreciable period of gold price appreciation, and it appears that the current cycle of commodity-price rises will continue for the long term. Investing in gold as a representative commodity means that the investor is in fact basing his or her investment decision on a very broad, strong, long term underlying trend.

Gold is easy to invest in

There are many different ways to invest in gold. An investor seeking ease of investment and breadth of available investments is very pleased with gold as an investment. The investor can buy gold in the form of jewelry and ingots, or in the form of shares in stocks, mutual funds, index funds, sector funds, commodity futures and options, and numerous derivative investments.

This wide range of investment options means that a prospective investor can choose to invest in gold through the marketplace with which he or she is most comfortable. If the investor is familiar stock-trading, for example then buying stocks in gold-mining companies may be an interesting strategy. Or, if the investor is a lover of antiques and collectibles, then the investment may be in the form of a purchase of gold bullion coins, or even a metal detector to find gold nuggets, coins and treasures hidden under the ground throughout the world.

In summary, the question “Is gold a good investment?” can be answered strongly and affirmatively: Yes. The best first step toward investing in gold is to contact a knowledgeable person to provide more information regarding the options for investing in gold.