Gold has been a valuable resource for centuries, and experts claim that it is not likely to change any time soon. Many people invest in gold to protect their finances during uncertain times. Here we will discuss the benefits of owning gold and how it may help you.
What Is Gold?
Gold is a chemical element with the symbol Au (from Latin: aurum) and atomic number 79, making it one of the higher atomic number elements that occur naturally. In a pure form, it is a bright, slightly reddish yellow, dense, soft, malleable, and ductile metal. A relatively rare element, gold is a precious metal that has been used for coinage, jewelry, and other arts throughout recorded history.
In the past, a gold standard was often implemented as a monetary policy. Still, gold coins ceased to be minted as a circulating currency in the 1930s, and the world gold standard was abandoned for a fiat currency system after 1971. One hundred ninety-seven thousand five hundred seventy-six tonnes of gold exists above ground as of 2019.[1]
As an investment option, gold offers several benefits. Gold is a hedge against inflation, government debt, and other geopolitical risks such as war or terrorist attacks. Gold is also relatively scarce – only about 190,000 tonnes in existence – making it valuable as a collector’s item.
Gold is also highly liquid, meaning it can be easily bought and sold. Finally, gold is widely recognized and accepted worldwide, making it an accessible asset to trade internationally.
The History Of Gold
Gold has been used for centuries as currency, jewelry, and other arts. The first gold coins were minted in Lydia (modern-day Turkey) in 560 BCE. Gold was also used in ancient China and Egypt as currency and jewelry.
In 1821, the first gold rush occurred in Australia, and gold was discovered in California in 1848, which led to a second gold rush. Gold was also used as currency during the American Civil War (1861-1865).
The world’s first central bank was established in 1694 and began using gold to back its paper currency. In 1717, the British government decided to tie the value of its currency to gold. This system, known as the gold standard, was used by most developed countries until the early 20th century.
In 1971, the world switched to a fiat currency system, where money’s value is not based on any physical commodity. Central banks hold gold reserves to diversify their assets and protect against economic uncertainty.
How To Invest In Gold
There are a few different ways to invest in gold. One option is to buy bullion, which is gold that has been melted down and cast into bars or ingots. Another option is to purchase coins, which governments mint.
Investment-grade gold coins include the American Gold Eagle, Canadian Gold Maple Leaf, British Sovereign, and South African Krugerrand. These coins are legal tender in their respective countries and are typically struck with higher purity than bullion bars.
Another option is to invest in gold exchange-traded funds (ETFs), which are investment vehicles that track the price of gold. ETFs are traded on stock exchanges, offering investors a way to get exposure to the gold market without buying and storing physical gold.
Finally, you can also invest in mining companies or mutual funds that hold investments in gold mining companies. This option offers a more indirect way to invest in gold and has counter party risk, but it can still be a viable option.
Gold Price Fluctuations And How To Protect Your Investment
The price of gold can swing dramatically in both directions over short periods. To protect your investment, it’s essential to have a clear understanding of what drives gold prices.
Gold is typically seen as a haven asset, which tends to go up in value when other asset classes fall. Investors view gold as a hedge against inflation and economic uncertainty. For example, gold prices will often rise when the dollar index is experiencing a downturn.
Final Thoughts
Gold could be the right choice if you’re looking for an alternative investment option with a long history of success. Just make sure that you do your research before investing any money. Contact an experienced precious metals broker to answer any questions you may have.
