Throughout the centuries, people have continued to hold gold for various reasons. Societies, and now economies, have placed value on gold, thus perpetuating its worth. It is the metal we fall back on when other forms of currency don't work, which means it always has some value as insurance against tough times.
Below are eight practical reasons to think about owning some gold today. Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next.
Since ancient times, people have valued the unique properties of the precious metal. Gold doesn't corrode and can be melted over a common flame, making it easy to work with and stamp as a coin. Moreover, gold has a unique and beautiful color, unlike other elements. The atoms in gold are heavier and the electrons move faster, creating absorption of some light; a process which took Einstein's theory of relativity to figure out. Although the U.
Gold has historically been an excellent hedge against inflation , because its price tends to rise when the cost of living increases. Over the past 50 years investors have seen gold prices soar and the stock market plunge during high-inflation years. This is because when fiat currency loses its purchasing power to inflation, gold tends to be priced in those currency units and thus tends to arise along with everything else.
Moreover, gold is seen as a good store of value so people may be encouraged to buy gold when they believe that their local currency is losing value. Deflation is defined as a period in which prices decrease, when business activity slows and the economy is burdened by excessive debt, which has not been seen globally since the Great Depression of the s although a small degree of deflation occurred following the financial crisis in some parts of the world.
During the Depression, the relative purchasing power of gold soared while other prices dropped sharply. This is because people chose to hoard cash, and the safest place to hold cash was in gold and gold coin at the time. Gold retains its value not only in times of financial uncertainty, but in times of geopolitical uncertainty. It is often called the "crisis commodity," because people flee to its relative safety when world tensions rise; during such times, it often outperforms other investments.
For example, gold prices experienced some major price movements this year in response to the crisis occurring in the European Union. Its price often rises the most when confidence in governments is low. Much of the supply of gold in the market since the s has come from sales of gold bullion from the vaults of global central banks.
This selling by global central banks slowed greatly in At the same time, production of new gold from mines had been declining since According to BullionVault. The opportunity cost of having your investment in physical metals instead of a dividend-rich stock could be considered another drawback.
Physical metals will only generate income when you sell the metals, unlike quarterly dividends associated with some stocks. When investors are ready to cash out their investment, they must also consider the liquidation process. Liquidating physical gold and silver may require shipping the metals to a reputable dealer. If the dealer you purchased from does not offer a buyback program, you will have to find another to purchase your metals.
Lastly, investors must remember there is always risk. While we can use historical trends to track the performance of precious metals, we cannot guarantee they will result in a positive return on investment.
Like any other investment, precious metals could go down in value. Though its historical performance has shown it to be one of the safest investments, there is still some level of risk. Investors should fully consider all these aspects before committing to gold. The information provided here is not investment, tax or financial advice.
In worst-case financial scenarios, such as massive currency devaluation, you can use gold and silver to buy and sell. That may sound crazy — but it has happened in other countries. Unlike stocks and bonds, a purchase of gold is not an investment in company growth.
You may have to wait years for gold to go up in value. How to buy and keep gold coins If you decide to buy gold coins, get it from a reputable dealer or financial institution.
For very little money, you can rent a safe at a bank for your gold and other valuables. You can always invest in gold without actually bringing home any gold coins. When was the last time you were in a coin and collectibles shop? Our goal is to give you the best advice to help you make smart personal finance decisions.
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The information on this site does not modify any insurance policy terms in any way. When economic times get tough or the stock market looks jittery , investors often turn to gold as a safe haven. Savers and investors like gold for many reasons, and it has attributes that make the commodity a good counterpoint to traditional securities such as stocks and bonds.
One of the more emotionally satisfying ways to own gold is to purchase it in bars or in coins. One of the largest drawbacks is the need to safeguard and insure physical gold. This is in contrast to owners of a business such as a gold mining company , where the company can produce more gold and therefore more profit, driving the investment in that business higher.
A pawn shop may also sell gold. The second-biggest risk occurs if you need to sell your gold. So you may have to settle for selling your holdings for much less than they might otherwise command on a national market.
Gold futures are a good way to speculate on the price of gold rising or falling , and you could even take physical delivery of gold, if you wanted, though physical delivery is not what motivates speculators.
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