Gold As an Investment

Why Gold is a Good Investment
The precious elemental metal gold is commonly used as an investment. Investors buy gold or invest in companies involved with the metal with the hope that the value of the commodity will rise. Although there are many properties that make gold as an ideal investment, it also possesses the potential to fluctuate in value.Gold has been used as store of value, investment and currency for many hundreds of years. Its rarity and the demand for its use in d├ęcor and jewelry give it its value. There was even a time when the US government had instituted what is known as the “gold standard” where the dollar was traded freely for gold, or vice versa, to stabilize the currency’s value.As an investment, gold has many potential benefits. First, commodities are goods that are fungible: one unit of a commodity is the same as a different unit, and units can be substituted with one another. This is what makes physical gold and other commodities like oil, platinum and silver easy to trade. Second, gold is not a currency that is produced by any country. That means that political troubles or economic policies are less able to have any effects its value. For example, when a country decides to increase the production of its currency, inflation may arise. Gold cannot be created and must be mined and the supply is finite. Most investors consider investing in the yellow metal as a hedge against any inflation. Gold also has some advantages over other precious metals. Investing in platinum can be very risky and it cannot easily convert it to cash.Investing in gold also has disadvantages. First, unlike stocks and bonds that can be filed neatly in a folder and stuffed in a drawer, investing in physical gold means storing the metal somewhere safe. Second, just like any other commodity, gold’s value can quickly change due to changing demand for it. Third, dealers and vendors of gold charge higher than its actual value to cover for minting costs.There are misconceptions associated with investing in gold. Most people believe that investing in gold means buying physical gold. However, one can invest in gold indirectly by investing in companies involved in the gold industry. An example would be investing in jewelry companies or mining companies that mine gold are great ways to benefit from rising gold prices buying actual gold bars or coins.There are investors who prefer to invest in gold when the price is high due to a belief that the price will keep on going higher and they can make better profits. There are others who choose to buy the yellow metal when the prices are low in order to make higher profits when prices rise.Because any investment possesses the potential to fluctuate in value, it becomes prudent not to commit too much of resources on any one investment. Any investment in gold should be coupled with other investments like bonds, mutual funds or other commodities. There is an old saying that says it is unwise to put all one’s eggs in one basket.More information on Gold as an Investment