Since time began, immemorial gold has been considered a safe haven against sweeping global economic uncertainty. Much the same is true today where the financial crisis and near economic collapse has seen widespread uncertainty decimate entire economies.
Greece, Spain, Portugal, and Italy are but a few examples of how severe an economic crisis can be, and stabilization remains a faraway reality. These generalized examples of financial ruin are a lot closer than many of us may imagine. The world indeed operates as an open economic system, and the interrelatedness of economies places each and every one of us in a position of profit or loss. As major currencies such as the euro or the dollar lose value, so the price of gold increases. But why is this? Is it not more lucrative to invest in startups, blue chip companies, or other stocks and bonds?
Gold Shines When the Gloom Sets In
The gold price fluctuates and it reflects the sentiments of speculators, supply, and demand. But overall, gold is a tangible asset — unlike currency which is largely unrelated to its actual worth. The problem with currency and monetary policy is that more money can be printed without the attendant “link” to real value or real assets.
Students are all too familiar with the uncertainty of the job market, the rising cost of student loans, and the burden of high taxation in an inflationary economic environment. In fact, given the $16 trillion debt that the USA is facing, it is clear that the country will be unable to continue on this course.
Should the dollar lose its value, as a result of poor monetary policy, then dollar-denominated savings will be worthless. However, remember that USA and all other countries went off the gold standard many decades ago. But the good news is that you can easily invest in gold to start planning for the rocky times ahead.
Investing in Gold — 5 Ways to Get it Done
Gold ETFs — These popular exchange-traded funds are akin to mutual funds. They trade on the stock exchange. The symbol for gold is GLD and IAU on the USA exchanges.
Gold Futures and Gold Options — These are for seasoned investors who seek to speculate on the price of gold. This investment option is more complex with call options and put options.
Junior Stocks of Gold — These are high-risk gold investments with big potential payouts. The capital investments in these mines are lower, thus adding more uncertainty to the mix.
Mutual Funds — Gold mutual funds provide investors with an alternative to investing in physical gold bullion.
Owning Gold — Gold bullion can be bought and sold fairly easily. Bear in mind that there are wide spreads between bid/ask prices on this precious metal. Gold does hold its value really well, and it’s a safe haven for the long-term.
About the Author: Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with economics and strategic management as his major subjects. Nowadays Brett contributes informative essays for the globally renowned spread betting and CFD trading provider, InterTrader.
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I never invested in gold and do not plan to start now. I may invest in commodities, but it is the real stuff.
My country has gone through a killer inflation 20 years ago (when our savings for a home were enough to buy a pair of pants), so you can guess many of us do not trust ANY currency. You never know what happens tomorrow. Gold has it value for thousands of years and will have value the next thousands of years (provided you do own it and not a piece of paper :))
Investing in precious metals is definitely a good idea- depending on what kind of investment you make.