Gold has always been used as a form of money since 560 BC. And even today, it is considered by many cultures as a valuable and long term investment as well as a safe haven in times of crisis. Gold and other precious metals are assets that are both tangible and liquid and hence considered safer than other investments. Most people believe that if the monetary or financial systems collapse, gold would still retain its value. Selling gold accumulated over the years could be the answer out of financial ruin. Thus gold as an investment is a prudent idea. Even central banks across the world are believed to retain large reserves of gold.
Today, gold trades in all the big financial markets around the world. It would not be surprising to note that a current market price for gold is being established in some market at any time of the day or night. Two of the most important world markets are in London and New York.
The London market is one of the oldest in the world as well as the largest for physical gold. The term ‘London gold fix’ which has been used since 1919 is used in contract arrangements across the globe. The New York market is particularly noted for the volume of "paper gold transactions" such as futures contracts that are traded on the exchange. The other important gold markets are in Zurich, Tokyo, Sydney and Hong Kong.
Today, like all investments, the price of gold is governed by demand and supply as well as hoarding and selling. The latter plays a more important role as far as the affectations in price are concerned because all the gold that is mined comes on to the market at the right price. Thus, given the huge quantity of hoarded gold compared to the annual production, the price of gold is affected by changes in sentiment rather than changes in production or demand on gold jewelry.
Why invest in gold?
There are some fundamental reasons why the price of gold will tend to see an incline in the next few years and gold as an investment will be considered a wise move.
- Since 2001, Gold is believed to have doubled in value. In a simultaneous reaction the U.S. Dollar index has fallen by about 23% while the Dow Industrials have only risen by 16%. That is why most analysts believe gold will continue its rise in a bull market and gold as an investment will continue to flourish.
- Another important reason for gold prices to increase is the continuous rise in world oil prices. The factors leading to this phenomenon are the Middle East crisis, OPEC’s commitment to higher oil prices and more importantly the potential decrease in oil supplies with a growing demand of oil from developing nations. Subsequently, as oil prices rise, so do the gold prices as it spurs inflation in the economy.
- Last but not the least it is the $63 million fiscal gap that is contributing to the rise in gold prices. The fiscal gap is a measure of the difference between projected future government expenditure and tax receipts. This means that, with a $63 million fiscal gap, the government is in debt or technically bankrupt. To manage this debt, it can print money which will only lead to inflation; thus precious metals such as gold will remain one of the few safe investments that not only protect us against inflation but also unrestrained government expenditure.
Thus, buying gold as an investment at today’s prices would offer considerable gains and protection from financial problems in the future.
William Brister http://moneyproguide.com/ - Buying gold as an investment at today’s prices would offer considerable gains and protection from financial problems in the future.
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